IMF expresses its concern over Nigeria’s $6.8bn indebtedness
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The International Monetary Fund (IMF) stated on Monday, May 31 that it has provided Nigeria with $6.8 billion in facilities between 2020 and to date, following the outbreak of Covid-19.
Mr. Ari Aisen, the IMF Resident Representative for Nigeria, made the announcement in Abuja while presenting the current Sub-Saharan Africa Regional Economic Outlook.
Nigeria received $3. 4 billion in Special Drawing Rights and a similar amount in loans from the Fund, he said.
Many African countries, including Nigeria, would face serious debt payment problems, according to Aisen, unless quick steps are done to considerably increase revenue.
He said that debt servicing accounted for more than 80% of federal revenue, describing it as a “existential crisis.”
“It’s a reflection of low revenue,” he explained. It is a matter of life and death for Nigeria. It is necessary for macroeconomic stability to exist. It is critical for the delivery of social services.”
He expressed confidence that, if finished, the Dangote Refinery would cut petroleum importation, lowering the subsidy load.
Mr. Aisen identified three critical priority areas for the continent’s economic future: reducing debt vulnerabilities, balancing inflation and growth, and managing foreign currency rate pressures.
“With unparalleled potential for renewable energy and an abundance of minerals,” he stated, “a successful transition offers prospects for diversification and job creation; ensuring the green transition is also a just transition.”
He decried Nigeria’s economic condition, in which the country, as an oil exporter, was unable to take advantage of current high oil prices to develop reserves while also experiencing poor earnings due to petroleum product subsidies.
According to him, with a monthly N500 billion petrol subsidy bill, the nation could hit a record N6 trillion subsidy, at the end of the year.
Fragile and conflict-affected African countries, according to the IMF representative, risk slipping further behind in terms of development, particularly given that the global economy is experiencing unprecedentedly high oil and food costs.
According to him, the Fund had done a lot to help African countries south of the Sahara by allocating $23 billion in SDRs and intending to re-channel another $100 billion in SDRs from rich countries.
Africa will require $425 billion to recover from the COVID-19 pandemic, as well as $30–50 billion per year for climate adaptation and $6-10 billion per year for commodity imports, according to the Rep.
Mr. Ben Akabueze, Director-General of the Budget Office, disputed with Mr. Aisen on his debt in his speech.
The debt service/revenue ratio was 76 percent, according to the DG, but even at that level, it was far too high.
“There is no doubt that debt servicing revenue is far beyond what we want it to be,” he said, adding that the federal government had taken initiatives to boost revenue dramatically.
He noted that increased revenue was the government’s sole option, but that the country would not default on its debt servicing responsibilities because it had been prioritised.
Mr. Akabueze expressed sadness that vested interests had made the removal of the gasoline subsidy difficult over the years, noting that “when you try to remove the subsidy or raise tariffs, you get summons, you see resolutions passed, begging you not to.”
He stated that when the administration drafted the 2022 budget, the intention was to eliminate the gasoline subsidy, but that this plan was thwarted in some way.
Dr. Hassan Mahmoud, Director of Policy at the Central Bank of Nigeria, noted that the Monetary Policy Rate (MPR) was recently hiked to ensure that the country could continue to attract investors while also preventing capital outflows that could harm the economy.