The International Monetary Fund (IMF) has cautioned the federal government to keep its borrowing from the Central Bank of Nigeria within legal limits.
The International Monetary Fund (IMF) gave the caution in a statement issued at the end of its staff visit to Nigeria. The mission led by Ms. Jesmin Rahman urged the authorities to keep reliance on CBN overdrafts for deficit financing within legal limits.
With regards to the extension of moratorium on principal payments granted to bank debtors, the IMF said the extension should be granted to viable debtors with strong pre-crisis fundamentals.
According to the IMF, the extension of the moratorium on principal payments of qualifying credit facilities on a case-by-case basis through March 2022 should be limited to viable debtors with strong pre-crisis fundamentals”.
While commending the actions taken by the CBN to manage monetary issues, the IMF noted that CBN stress tests purport that the banking system would remain adequately capitalized except in case of a severe deterioration of 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.