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CBN warns against sharing all FAAC proceeds

The Federal Government has been warned against sharing all proceeds from the Federation Account at the monthly FAAC meetings to avert a macroeconomic downturn in the event of an oil price shock.

Dateline Nigeria reports that the Federation Accounts Allocation Committee (FAAC) had, in December, shared the sum of N716.298 billion to the Federal Government, States and Local Governments.

The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) gave the warning in a communique it issued at the end of its 271st meeting held on Thursday and Friday in Abuja.

It urged government to gradually reduce reliance on oil receipts and focus on revenue diversification through reforms of the tax system.

On fiscal operations, the committee applauded the Government for the recent signing of the 2020 Finance Bill which, it said, opens a new vista of opportunities in public financial management.

The MPC, however, cautioned that public debt was rising faster than both domestic and external revenue, noting the need to tread cautiously in interpreting the debt to GDP ratio.

The committee also called on government to rationalize fiscal expenditure towards reducing the current excessively high cost of governance.

The committee noted the improved performance in the equities market and the sustained resilience of the banking system, evidenced by the continued moderation of the Non-Performing Loans (NPLs) ratio from 6.6 per cent in October to 6.1 per cent in December 2019.

The MPC, according to the communique signed the governor of the CBN Godwin Emefiele, also voted to change the Cash Reserve Requirement (CRR) from 22.5 to 27.5 percent; retain the Monetary Policy Rate (MPR) at 13.5 per cent; the asymmetric corridor of +200/-500 basis points around the MPR; and  the Liquidity Ratio at 30 per cent.

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