Violation of Section 38 of the Central Bank of Nigeria (CBN) Act — a restriction of the amount that can be lent to the federal government by the CBN to five percent cap of former accounting year — can lead to exchange rate-induced inflation. To avoid this situation, the Executive Officer of Dairy Hills Limited, Kelvin Emmanuel, advised the Senate concerning amendment of the CBN Act as a means a securing the advances, eventually requiring a 21 percent interest rate, or the country prepares to get into serious crisis.
Experts have also stressed the need for the next administration to amend the 2023 Appropriation Act to boost the revenue targets of Ministries, Departments and Agencies (MDAs) and ensure reduction of deficit financing. Recently, China EXIM Bank, under the Chinese Government, rejected the Federal Government’s debt request of $22.8 billion. There is also an argument to reduce the debt-to-GDP ratio from 18 to 20 percent band to avert negative effects of expansion of a fractured fiscal position.
Overdependence on oil revenue affect other reliable sectors.
In the next administration’s fiscal strategy, it is advised that there is avoidance of a medium-term expenditure framework that solely depends on debt as a medium of funding budget deficits. According to experts, the major reasons for Nigeria’s increasing public debt is its over-reliance on oil revenue and the federal government’s fiscal irresponsibility. Huge dependence on oil revenue has led to neglect of other reliable sectors like agriculture and manufacturing. However, depleting oil revenue has made the country struggle with budget deficits, leading to massive debts.
Minister of Finance, Budget and National Planning, Zainab Ahmed, during the process of requesting a loan approval from the National Assembly to fund a N4.97 trillion deficit in the 2020 budget, affirmed that Nigeria has a revenue problem. Some experts questioned this statement by the minister, saying it was a denial of the massive debt problem confronting the country; some said it was to detonate the unhealthy loan habits and wasteful spending of the government; while some agreed with the same position as the minister.
Misplaced priorities by the government affects debt increase.
According to Fiscal Policy Partner and Africa Tax Leader at PwC Nigeria, Taiwo Oyedele, the main reason of Nigeria’s increasing debt is the low generation of revenue. Low revenue generation has to do with fragmented tax administration with different agencies, struggling to collect different taxes and levies. The ineffectiveness of this process causes problems for the government and excessive burden on businesses and individuals. To address the issue, government needs to ensure harmonization of taxes and revenue agencies.
Another issue that contributes to increasing debts is inefficient government spending and misplaced priorities. Rather than investing in basic infrastructure and human capital development, funds are diverted on projects with really inflated cost. On most occasions, these projects are unnecessarily delayed, thereby increasing cost and diminishing public value. There is also the issue of poor management of assets and resources, crude oil vandalism, wasteful subsidy regime, and political interference in issues that concern major government business organizations.
FG displays fiscal irresponsibility and mismanagement.
Prof. Oyebanji Oyelaran-Oyeyinka of the African Development Bank, in his comment said that the Excess Crude Account (ECA) which is supposed to serve as a reserve for the country during hard times has suffered depletion. In his words, the government displayed an act of fiscal irresponsibility and mismanagement when it refused to replenish the ECA after depletion, even when the prices of oil were well above the benchmark price. Nigeria began to have it wrong when it started taking funds from the ECA.
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Exchange rate-induced inflation looms. – Amendment of CBN Act will save the country from economic crisis. – Express your point of view.
Exchange rate-induced inflation is a severe concern for both individuals and nations. Governments must take proactive measures to combat inflation to prevent long-term damage to the economy.
It is because of the stupid way the government has been spending money that has affected the value of our currency and made it seem so worthless compared to other world currencies.
Our central bank ought to be aware of the fact that there is the possibility of avoiding a moderately budgetary structure that is wholly reliant on debt as a means of making up for budget deficits.
The government’s reliance on oil money has caused it to underinvest in other reliable industries; to remedy this, it must allocate resources to the development of other profitable sectors in the country so the exchange difference can reduce.
The exchanged rate is one of the factors that increases inflation in Nigeria. Things are very cos because of the exchange rate and we need to try to make the economy work for us.
The hunger for loan by this administration is too outrageous. It should be controlled. Our government should begin to look inward for solution rather than loan seeking from the CBN and foreign banks. The amendment of the CBN Act will of course the nation from the economic crunch.
The exchange rate is part of what cause issue to our economy increase inflation we should do how the exchange rate will benefit our country the Amendment of CBN Act that will save the country from economic crisis is a right step to take our economic need to balance
Exchange rate-induced inflation looms. All this is not the problem of this country, Nigeria is not serious yet especially the government. They are not ready because they only talk without action
Exchange rate inflation should be curbed by any means, the current inflation nigeria is experiencing is not favorable to its citizens
If it’s actually the amendment of the CBN act that will turn around the situation government should go for it because the economy condition right now is not favorable at all with the high inflation.
The displays fiscal irresponsibility and mismanagement of the federal government and corruption was the major reason why Nigeria economy is in chamble and the government didn’t take it serious up till now.
The wanton desire by our government to consistently seek for loan to fund the country budget rather than generating the fund from our abundant resources shows gross irresponsibility and incompetency in their part. Even when the loan is gotten, they mismanage the fund not fully achieve their aims. It is just share misplaced priority. My greatest concern is the future unborn generation that they are putting into slavery debt. Please, the CBN Act should amended to save the country from economic crisis that this present administration is about to bring on us.