Overview

This document is the keynote address delivered by Chief (Dr.) J.O. Sanusi, Governor of the Central Bank of Nigeria (CBN), at the 7th Monetary Policy Forum held on May 22, 2003, in Abuja. The theme of the forum is 'Management of Nigeria’s Domestic Debt.' The address highlights the escalating domestic debt profile of Nigeria and its implications for economic stability and growth. Sanusi traces the growth of Nigeria's domestic debt from N23.5 million (1.0% of GDP) in 1960 to N1,160.0 billion (83.6% of GDP) by end-December 2002, attributing this sharp increase to fiscal deficits arising from failure to adjust during periods of declining revenue. He notes that the debt is predominantly short-term treasury securities held mainly by the banking system, particularly the CBN. The address stresses that excessive government borrowing from the CBN injects high-powered money into the economy, leading to inflation and exchange rate instability, and crowds out private sector credit, stalling investment and output. Sanusi argues that deficit budgeting is not inherently problematic; rather, the size, source of financing, and quality of expenditure matter. He calls for reactivating the dormant bonds market to attract long-term savings and emphasizes that borrowed funds must be used productively to ensure returns exceed servicing costs. The address underscores that effective debt management requires prudent utilization of resources to avoid debt overhang, and fiscal adjustment is critical for stabilization.

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