Share
Nigeria moves to settle Ways & Means loans
Nigeria’s Minister of Finance, Wale Edun says 4.83 trillion naira from T-Bills and Bonds issued in the first quarter of this year was used to pay part of the Ways and Means advances from the Central Bank of Nigeria. Sam Chidoka, CEO of Kairos Capital joins CNBC Africa for more on this discussion and Nigeria's debt management strategy.
Fri, 12 Apr 2024 11:59:40 GMT
Disclaimer: The following content is generated automatically by a GPT AI and may not be accurate. To verify the details, please watch the video
AI Generated Summary
- Challenges and risks associated with using T-Bills to settle Ways and Means advances, potentially leading to a cycle of debt accumulation without addressing underlying issues
- Concerns about Nigeria's mounting debt burden, budget performance, and the need for clarity on borrowing purposes
- Impact of elevated interest rates at T-Bills auctions on private sector borrowing costs and inflation, highlighting the importance of cautious auction practices to prevent market distortions
Nigeria's Minister of Finance, Wale Edun, revealed that 4.83 trillion naira from T-Bills and Bonds issued in the first quarter of this year went towards settling part of the Ways and Means advances from the Central Bank of Nigeria. This move has sparked a conversation about the country's debt management strategy and its long-term implications for investors and the economy. Sam Chidoka, CEO of Kairos Capital, shared his insights on this matter in a recent interview on CNBC Africa. Chidoka raised concerns about the government's approach to debt management, highlighting that while using T-Bills to pay off Ways and Means advances may bring some form of fiscal discipline, it essentially replaces one form of debt with another. He pointed out that Nigeria has cumulatively borrowed 30 trillion naira through Ways and Means, with the current administration adding 7.3 trillion naira to that figure. By relying on T-Bills auctions to service this debt, the government risks getting trapped in a cycle of borrowing and debt servicing without addressing the underlying issues that lead to excessive debt accumulation. Chidoka emphasized the need for clarity on the government's borrowing purposes, stating that investments in critical infrastructure can drive economic growth, whereas borrowing for recurrent expenditures hampers progress. The mounting debt burden, which currently stands at 97 trillion naira, is projected to consume a significant portion of government revenue, raising concerns about debt sustainability and budget performance. Additionally, the elevated interest rates at recent T-Bills auctions could have a crowding-out effect on corporate borrowers, leading to higher borrowing costs and inflation. Chidoka highlighted the need for caution in conducting future auctions to prevent market distortions that could hinder private sector investment. The discussion also touched on Nigeria's inflation outlook and foreign exchange market dynamics. Chidoka expressed a cautious optimism about the recent Naira appreciation but emphasized the need for sustainability and prudent management of forex reserves. As the economy navigates these challenges, stakeholders will closely monitor key economic indicators and policy decisions to gauge the country's recovery prospects and investor confidence. The path ahead will require a delicate balance of debt management, economic stimulus, and structural reforms to steer Nigeria towards sustainable growth and financial stability.
SIGN UP FOR OUR NEWSLETTER
DAILY UPDATE
Get the best of CNBC Africa sent straight to your inbox with breaking business news, insights and updates from experts across the continent.
Get this delivered to your inbox, and more info about about our products and services. By signing up for newsletters, you are agreeing to our Terms of Use and Privacy Policy.