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IMF Cautions FG On CBN Borrowings

The International Monetary Fund (IMF) has warned the federal government to stay within lawful borrowing limitations from the Central Bank of Nigeria.

In a statement released at the conclusion of its staff visit to Nigeria, the IMF issued the warning.

Ms. Jesmin Rahman, who led the team, advised the authorities to decrease their reliance on CBN overdrafts for deficit financing.

The IMF recommended that the government reduce its borrowing from the CBN and improve budget planning and public finance management processes to enable for more flexible financing from domestic markets and better integration of cash and debt management.

The IMF stated that the extension of the moratorium on principal payments provided to bank debtors should only be given to sustainable borrowers with good pre-crisis fundamentals.

According to the IMF, the moratorium on principal payments of qualified credit facilities should be limited to viable debtors with good pre-crisis fundamentals on a case-by-case basis until March 2022.

While applauding the CBN’s efforts to address monetary difficulties, the IMF pointed out that stress tests conducted by the CBN indicate that the banking system would be properly capitalized unless in the event of a serious deterioration in credit quality.

“It remains to be seen what share of forborne loans may turn non-performing as the impact of the pandemic abates. Since NPLs often rise at the later part of economic crisis, CBN’s strong oversight remains critical to safeguarding financial sector stability,” IMF stated.

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