However, in the interest of the overall well being of the economy, the apex bank has come out with pre emptive monetary policy measures aimed at controlling the inflationary monster.
Governor of the CBN, Mallam Lamido Sanusi, briefing the media after the maiden edition of the Monetary Policy Committee meeting for 2011, stated that the committee noted that the risk of inflation was on the upward side as a result of the liquidity injections from the likely increase in government spending in the run up to the 2011 general election in the country, purchases in the Asset Management Company of Nigeria, rising global energy and food prices and the expected pass through to the domestic economy.
The apex bank, noting that the existing subsidy regime on petroleum products was not sustainable in view if the current government finances, stated that inflation remained a major concern that could not be ignored in short to medium term.
Mallam Sanusi disclosed that the committee noted the inability of the apex bank to record a single digit level of inflation and had thus emphasised the imperative of addressing both the supply and the demand side factors that determine inflation dynamics in Nigeria.
â€œOne of the ways to keep aggregate demand in check is to restrain debt-financed government spending in the medium term. This calls for a review of subsidies and other recurrent expenditure categories that constitute a drain on the national budget as well as improving the revenue base Â» the apex bank boss disclosed.
Meanwhile, against the backdrop of clamour against government borrowing, the Debt Management Organisation, (DMO) has disclosed that the country cannot do without borrowing, stressing that borrowing is imperative for any economy worth its salt.
Also the DMO has put the external debt portfolio of Nigeria at US$4.78 billion as at December 2010.
In an interactive session with the Finance Correspondents Association of Nigeria(FICAN) in Abuja, the Director General of DMO, Dr Abraham Nwankwo said that the multilateral debts(mostly soft loans) constitute the bulk (92.45%) of the external debt stock.