As the Federal Government continues to finance its budget deficit through bonds, the Central Bank Governor, Mallam Sanusi Lamido Sanusi, has warned that the nation risks default, should it continue to commit greater part of the borrowings to subsidy. According to him, “If we continue spending a trillion plus every year on debt to subsidise fuel for another three years; what will happen is that we run into huge sovereign debt.” By running into sovereign debt means that the Federal Government can no longer honour its obligations to its bond holders, from whom it borrowed to finance its deficit.
Sanusi, who gave the warning in a media interview during the period of subsidy removal protests, urged the nation to learn from the mistakes of other nations that ran into sovereign debt crisis.
“We have seen Greece, Italy, Spain, and Ireland. We have seen the Asian and Latin American financial crisis. We have seen what sovereign debt can do to a country,” he said.
He warned that if Nigeria intends to build up its reserves; build stable exchange rate; maintain stable inflation rate; and have sustainable debts, it has to do something.