CBN Prompted to Minimize Lending to Federal Government

The Central Bank of Nigeria (CBN) has been advised to minimize lending to the federal government in order to reduce Nigeria’s expenditure and decrease debt portfolio in the country.

Mr Bode Agusto, CEO of Agusto & Co stated that the central bank’s continuous disbursal of loan to the government will force the FG to live within its quota.

Bode Agusto during  the “Nigeria in 2022” webinar stated that the CBN has been a lever for the governments spending and therefore he urged the Central Bank of Nigeria to reduce its debt support for the government.

His words; “First of all, we must take the view that the country’s bigger than any government. Let’s take the view that we must save our country. Because if we don’t save our country, we will have problems. The central bank must be able to take a position that will force government to live within its means.

“This is going to force difficult reforms on governments because what we are doing today is to give governments an easy way out of their spending. If only if we had a central bank that says that the law says I cannot give you the overdraft of more than 15 per cent of previous year’s revenue.”

“Therefore, if the tap is shut, government will look inwardly and look at ways of reducing his expenses. It would manage its resources better. Government will be forced to exploit more avenues to raise his tax revenues. But if you just open the tab and allow them to be drawing, the discipline will not be there and the more we grow the debt, the more difficult is going to be to resolve the question down the road,”.

With  respect to the 2022 economic outlook of Nigeria, he explained that the severity of the Covid-19 will lessen and economic activities will recover, He further stated that brent crude production capacity will increase to 100 million bpd and dollar availability for importation will be estimated at $90 billion.

“we believe that COVID-19 will remain with us, but he will be less deadly and will cause less disruption to business activities.

“crude oil will rise to 100 million barrels per day demand for OPEC+ crude will also rise marginally and compliance with quota will remain important. If members are in compliance. The price of brent could be average about $75 per barrel. Brent’s price is roughly the same thing as Bonny. Light, which is the benchmark crude for Nigeria.

“The amount of dollars available for imports will be about $90 billion out of it all the imports will be about $11 billion, the remaining $79 will fund imports of goods and services, the CBN may bleed reserves and add an additional $5 billion to increase the amount of dollars available for businesses but overall, we believe that the amount of dollars available for businesses will improve.”

Agusto also noted that the exchange rate differential will continue to exist and the CBN will capitalize on this to increase oil and gas revenue. He noted that expect the apex bank injects money into the circulation in the parallel market, naira to dollar could be quoted at N610/N620 towards the end of the year.