CBN urges states to reduce dependence on overdrafts
The Central Bank of Nigeria has called on state governments to cut back on overdrafts and short-term borrowing. Dr Muhammad Abdullahi stressed the need for stricter fiscal discipline to support price stability and ongoing macroeconomic reforms. The CBN warned that reckless fiscal behaviour at the sub-national level could undermine Nigeria’s transition to an inflation-targeting monetary policy. The bank also highlighted the importance of collaboration between the central bank and state authorities.
TLDR
- Dr Muhammad Abdullahi urged states to align borrowing with debt sustainability thresholds, improve budget realism, and prioritise expenditure.
- The CBN warned that expansionary fiscal activities by states could weaken monetary policy effectiveness and worsen inflation.
- State governments were advised to maintain fiscal discipline, pursue responsible borrowing, and strengthen internally generated revenue mobilisation.
- Excessive supplementary budgets, unplanned spending, and unsustainable debt accumulation could trigger liquidity shocks.
- Data showed the combined external debt of 36 states and the FCT rose from $4.80bn as of December 31, 2024, to $5.68bn as of December 31, 2025, reflecting an increase of $884.66m, or 18.43% year-on-year.
