CEM REPORT, FINANCE | Nigeria is in talks with the International Monetary Fund (IMF) and the World Bank to restructure the country’s debts.
This is as the country projects to spend about 65 percent of its revenue in 2023 to service debt.
According to the Minister of Finance, Budget and National Planning, Zainab Ahmed who disclosed this at the IMF/ World Bank annual meetings in Washington D.C noted that the country can cope with its debt service in 2022 as well as in 2023 and is hence engaging financial institutions to look at the opportunity to restructure the debt to further stretch the debt service period.
“It is a fact that Nigeria’s debt has increased over the last three to four years and this increase in debt was occasioned by the different kinds of exogenous shocks that the country faced which are not unique to Nigeria.
“The situation we have by our 2023 projection is that we will be needing to use about 65 per cent of our revenue to service debt. Unfortunately, the cost of debt service is rising because of the rising interest rate globally which is resulting also in higher debt service costs.
“But our projection from the debt sustainability analysis is that Nigeria is able to cope with its debt service in 2022 as well as in 2023. We have been engaging financial institutions to look at the opportunity to restructure our debt to further stretch the debt service period to give us more fiscal relief. Those are some of the things we want to achieve in this meeting.”
The nation’s finance minister disclosed that the country is also considering tapping from the IMF’s newly created Food Shock Window, which allows member countries to access emergency financing instruments.
She explained that the recent flooding in the country has destroyed several crops and invariably harvest will be at a much-reduced quantity.
She quickly added that the federal government has not yet decided to draw from the fund as it is considering the requirements.
“The last drawing we had from the IMF was the second round of Special Drawing Right (SDR) that was provided for all the member countries of the IMF.
“The IMF recently offered a food security package that countries can draw and it is equivalent to about 50 per cent of their SDRs. We have not taken a decision to draw on that, we have to examine what are the requirements to see if it will be safe for us to draw because we don’t want to be drawn into an IMF program and as it is, we are studying the terms and conditions.
“If they work for us, we will now decide to take it because the funds can certainly be useful in terms of adding to our reserves and also in terms of helping us to cope with the challenges that the country is facing especially as the floods that have been happening right now in the country is going to cause more stress on our food system.
“We realise that the floods that are happening are currently destroying crops and therefore the harvest that is expected will be much less and it will mean that more of our people will struggle to be able to afford food.”
Meanwhile, the IMF has reiterated that the Nigerian government need to save some of the country’s oil earnings in these times of high energy prices as well as increase its domestic revenue drive to reduce external borrowings.
The Divisional Chief, Fiscal Affairs Department IMF, Paulo Medas, noted that 19 out of 35 African countries are presently in debt distress or at risk of debt distress and stressed the need for more responsible fiscal measures to be taken by countries in the continent.
“Nigeria has benefited from higher oil revenues. We haven’t seen an improvement in the deficits as we hoped because of the large energy subsidies, but also other issues with the production of oil and other pressures on the budget.
“So, our recommendation is to try to save some of these oil revenues but also address these emergency needs. Another aspect I would say is that Nigeria is one case where tax revenues are really low and this really undermines the capacity of the government to mark these types of shocks and to provide key services.”