Keep CBN Overdrafts Within Legal Limits, IMF Tells FG

*Cautions Fed Govt On CBN Borrowings

The International Monetary Fund (IMF) has cautioned the federal
government to keep its borrowing from the Central Bank of Nigeria
within legal limits.

The 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.

The IMF advised the government to moderate its borrowing from
the CBN as well as strengthen budget planning and public finance
management practices to allow for flexible financing from domestic
markets and better integration of cash and debt management.

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.

*Cautions Fed Govt On CBN Borrowings

The International Monetary Fund (IMF) has cautioned the federal
government to keep its borrowing from the Central Bank of Nigeria
within legal limits.

The 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.

The IMF advised the government to moderate its borrowing from
the CBN as well as strengthen budget planning and public finance
management practices to allow for flexible financing from domestic
markets and better integration of cash and debt management.

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.