CBN Warns States Against Excessive Short-Term Borrowing

The Central Bank of Nigeria (CBN) issued a warning to state governments regarding the dangers of excessive short-term borrowing, which could undermine Nigeria's inflation targets and monetary policy framework. This statement was made by Deputy Governor Dr. Muhammad Sani Abdullahi during an engagement with stakeholders at the Nigeria Governors' Forum (NGF) secretariat.

He stressed that achieving inflation targets requires stronger fiscal coordination between federal and state governments to ensure price stability. Abdullahi cautioned that reliance on overdrafts and supplementary budgets is unsustainable and could weaken monetary policy, leading to inflationary pressures.

He urged state governments to align their borrowing with sustainable debt thresholds and improve revenue forecasts. The CBN outlined four major responsibilities for states under the new framework, including maintaining fiscal discipline and adopting responsible borrowing practices.

Earlier, Dr. Victor Oboh, Director of Monetary Policy at CBN, noted that achieving inflation targets is crucial for reducing macroeconomic uncertainty and improving policy credibility.