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Budget Deficit: More Debt Instruments Would Crowd Out Private Businesses In Nigeria – FEC

-by our correspondent.

The federal government’s plans to float more debt instruments in the domestic market through the Central Bank of Nigeria (CBN) would deprive the private sector of needed affordable funds to grow their businesses.

The Financial Derivatives Company (FDC) disclosed this in its latest report regarding Nigeria’s rising debt burden.

“While this is likely to ease pressures on growing external debt and exchange rate volatility, the likely increase in domestic debt issuance will result in a crowding out of the private sector,” FDC noted.

MD/CEO, Financial Derivatives Company Limited, Bismarck Rewane

The report however, noted that the proposed issuance of additional over N11 trillion worth of fixed income instruments into the market could bring stability and also spur a spike in interest rates.

Recall that the federal government in its 2021 budget ruled out further borrowing from the International Monetary Fund (IMF) partly due to stringent conditionality, but decided to finance the N5.7tn deficit with funds from the domestic market.

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