CBN expresses grave concern over FG’s borrowing appetite
CBN Head Quarters, Abuja
Apex bank, Central Bank of Nigeria, (CBN), has warned against the excessive borrowing appetite of the Federal Government.
The pace of government’s borrowing according to the monetary policy committee; (MPC) has exceeded the target for the 2017 fiscal year.
The CBN position came along with its Monetary Policy Committee, (MPC), decision at the end of the second quarter 2017 meeting, yesterday, to retain all its key policy rates, citing the challenges weighing down the domestic economy and uncertainties in the global environment. The decision also followed announcement by the National Bureau of Statistics, (NBS), that the nation’s economy contracted for the fifth consecutive quarter, as the real Gross Domestic Products, (GDP), declined by 0.52 per cent in the first quarter of 2017.
According to the NBS, “In the first quarter of 2017, the nation’s Gross Domestic Product, (GDP), contracted by -0.52 per cent (year-on-year) in real terms, representing the fifth consecutive quarter of contraction since Q1 2016.
This is 0.15 per cent higher than the rate recorded in the corresponding quarter of 2016 (revised to -0.67 per cent from -0.36 per cent) higher by 1.21 per cent points from rate recorded in the preceding quarter, (revised to -1.73 per cent from -1.30 per cent).
Quarter-on-quarter, real GDP growth was 12.92 per cent. During the quarter, aggregate GDP stood at N26.03 trillion in nominal terms, compared to N22.24 trillion in Q1 2016, resulting in a nominal GDP growth of 17.06 per cent.”
Announcing the decision of the MPC meeting, CBN Governor, Mr. Godwin Emefiele said the Net Domestic Credit, (NDC), grew by 1.40 per cent in April, 2017, annualized to 4.21 per cent, which is significantly below the 17.93 per cent provisional growth benchmark for 2017. However, net credit to government, according to him, grew by 24.08 per cent over end-December 2016, representing an annualized growth of 72 per cent.
The Communiqué released by MPC at the end of its meeting stated: “The Committee was concerned that credit to government continued to outpace the programmed target of 33.12 per cent for fiscal 2017, while credit to the private sector declined considerably far below the programmed target of 14.88 per cent.”
On the other hand, the MPC called for increased lending to the private sector by banks, even as it urged the CBN to increase surveillance of the banking sector.
“On the financial stability outlook, the committee noted that in spite of the banking sector’s resilience, the weak macroeconomic environment has continued to exert pressure on the banking system.
The MPC urged the CBN to intensify its surveillance, in order to address emerging vulnerabilities.”