The Central Bank of Nigeria (CBN) has warned Nigeria and other West African nations regarding trends in borrowing practices.
Traditionally, nations often relied on loans from the Paris Club, a group of creditor countries.
However, the CBN said it has observed a significant shift towards borrowing from non-Paris Club members and private lenders, such as banks and investors who buy government bonds.
The West African Institute for Financial and Economic Management has warned that Nigeria is at a high risk of falling into debt distress and urged the federal government to look for ways of improving revenue generation.
Governor of the CBN, Yemi Cardoso, gave the warning in Abuja at the Joint World Bank/IMF/WAIFEM Regional Training on Medium Term Debt Management Strategy in Abuja on Monday.
Represented by Dr Mohammed Musa Tumala, Director of the Monetary Policy Department of the CBN, Cardoso noted that while this change in who countries owe money to might seem like a minor detail, he emphasised that it is a critical development with serious implications.
He argued that the way countries manage debt owed to the Paris Club may not be as effective for these new lenders. Cardoso expressed concern that this new debt landscape could pose a threat to financial stability and economic recovery for many countries.
Cardoso said, “Public debt dynamics are increasingly influenced by significant debt servicing obligations to non-Paris Club members and private lenders, including commercial banks and bond investors.
“This shift in the debt structure represents a critical evolution in the global financial framework, with profound ramifications for public debt management in our countries.”
