Nigeria Hasn’t Requested Debt Restructuring – World Bank Boss

Nigeria has not requested debt restructuring from international financial institutions as allowed under the Common Framework for debt treatment beyond the Debt Service Suspension Initiative, DSSI, the World Bank has said.

World Bank President, David Malpass, stated this in Washington, at his opening press briefing of the ongoing annual meetings of the World Bank and IMF.

He, however, added that any request for debt relief from Nigeria would be subjected to assessment of the country’s debt sustainability.

The Common Framework for debt treatment beyond the DSSI (Common Framework) is an initiative endorsed by the Group of 20 Most Industrialised Nations, G20, alongside the Paris Club of Creditors last November to support, in a structural manner, Low Income Countries with unsustainable debt.

The Common Framework considers debt treatment, on a case-by-case basis, driven by requests from eligible debtor countries. In response to a request for debt treatment, a Creditor Committee is convened. Negotiations are supported by the IMF and the World Bank, including through their Debt Sustainability Analysis.

Nigeria’s public debt up 253% in 7 years

Nigeria’s public debt rose by 253 per cent in seven years to N42.84 trillion at the end of June 2022, from N12.12 trillion at the end of June 2015, while debt service cost gulped 114 per cent of federal government revenue from January to April, triggering rising concerns over the sustainability of the nation’s public debt.

However, the Minister of Finance and National Planning, Zainab Ahmed in a media interview on Wednesday on the sidelines of the annual meetings, had said that the Federal Government is also mindful of the rising debt service cost, worsened by interest rate hike and dollar appreciation, and has commenced discussions on debt restructuring for Nigeria with the World Bank, IMF and other financial institutions.

She had said: “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.”

But World Bank President, David Malpass, said Nigeria has not asked for such debt relief treatment as provided for in the Common Framework for debt treatment beyond the DSSI.

He said: “With regard to debt restructuring, the World Bank works very closely with the IMF on debt situations. Nigeria has not asked for the Common Framework under the G20 process. The process has been slow in acting in Chad, Ethiopia, and Zambia and there are some signs of movement on Zambia but it’s still challenging.

“So Nigeria and Ghana both did not ask for a Common Framework treatment. IMF President Kristalina Georgieva and I were talking yesterday with the group about if countries could have a situation where the common framework paused or allowed the country to have a standstill on their debt. That would help the countries choose their path forward on debt restructuring, and that would mean they would get a break on debt payments while they’re working out a restructuring agreement with the world but Nigeria hasn’t gone that route.

“So we would work with the IMF on an assessment of the debt sustainability of Nigeria but then it would also be up to Nigeria itself to interact with the various creditors, which include bondholders and includes official creditors that are engaged in Nigeria.”

Other economic challenges

Speaking further, Malpass added that besides the debt burden, other challenges bedevilling Nigeria’s economy include petrol subsidies, multiple exchange rates and trade policies.

He said: “Some of the challenges in Nigeria that I’ve talked about and been involved with for some time is the dual exchange rate or the multiple exchange rates that are used which makes it very hard to have capital flowing in an efficient way within the country.

“Also, the trade policies tend to be protected on the import side and restrictive on the export side.

“With regards to subsidies to the extent that governments can have them be smaller meaning if you’re putting a cap on gasoline prices, don’t make that a nominal cap in the local currency terms but allow it to be reduced over time.

“So the challenge for Nigeria is that the subsidies are so large that they undermine the revenues coming to the government from the state-owned oil company.

“Nigeria is actually in a concerning situation because the increase in the oil prices that occurred earlier this year actually ended up hurting the finances of Nigeria because of that large subsidy that’s provided.”

Lagos, Rivers, Nigeria’s most viable states – BudgIT

Meanwhile, Lagos and Rivers’s states have been ranked as the most viable states in the country, according to the State-of-the-States report which was released by BudgIT, a non-governmental organization, yesterday.

It said that states that ranked highest on the index are those considered to be very viable and could finance their budgets without relying on allocations from federation revenues.

Lagos topped the list as it was ranked 0.82; followed by Rivers which was ranked 0.82 on the index. Others were: Kaduna, 1.33; Ebonyi, 1.46 and Jigawa 1.64.

According to BudgIT, “states that rank higher on Index A have comparatively limited dependence on federally distributed revenue for their operations and thus have greater viability if they were to theoretically exist as an independent entity.

“In contrast, states that rank lower on the Index A either need to work harder on growing their Internally Generated Revenue, considering the size of their operating expenses or work on pruning their operating expenses.”

States ranked lowest include Bayelsa , 7. 45; Yobe, 7. 03; Adamawa 5. 72; Taraba, 5. 66; Benue 5. 41 and Akwa Ibom, 4. 90.

On Index D, which measured capital investment in infrastructure, Rivers topped the table, followed by Kaduna, Cross River, Ebonyi, Anambra, Akwa Ibom, Kebbi, Sokoto and Lagos. Benue was identified as the lowest in terms of infrastructure development. It was followed by Plateau, Ondo, Adamawa and Niger, in that order. Rivers was equally ranked highest on Index B which measured public revenue left to implement capital expenditure components of the states’ budgets after fulfilling repayment obligations to lenders and their government operating expenses.

According to the organization, Jigawa had the highest Index A1, for significantly growing its Internally Generated Revenue Year-on-Year and therefore progressively reducing its dependence on federal transfers.

Borno scored 1,14, Kastina 1.12, Ekiti, 1,02 and Sokot 1.01 percent on the index.

On the contrarily, states that rank low on this index have had either a negative or poor growth in their IGR and thus remain heavily dependent on federally distributed revenue to implement their budgets.

The lowest states on this index were: Kebbi , 0.28; Anambra, 0.09; Kogi 0.03; Akwa Ibom, 0.02; Kaduna, 0.03; Yobe 0.09 and Osun 0.11.

The report indicated on Index C that states like Jigawa and Delta states led the table of those that have more room for borrowing.

It said that those states “have more comparative fiscal bandwidth to borrow more due to their comparatively sustainable debt profiles which is determined by their debt-to-revenue ratio, debt-to-Gross Domestic Product ratio, debt service -to-revenue ratio and debt-to-personnel cost ratio.”

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