‘The World Bank said that some of the challenges in Nigeria included multiple exchange rates and restrictive trade policy’
The President of the World Bank Group, David Malpass, has said that the bank will work with the International Monetary Fund to assess Nigeria’s debt sustainability.
Malpass said this during the 2022 annual meetings opening press conference in Washington, D.C. on Thursday.
He said, “We will work with the IMF on an assessment of the debt sustainability of Nigeria but it will be up to Nigeria itself to interact with the various creditors, which include bond holders, official creditors, that are engaged in Nigeria.”
Earlier, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, had disclosed that the Nigerian government was in talks with the IMF and the World Bank to restructure the country’s debts.
She said: “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 is 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.”
However, the World Bank Group president said that Nigeria was yet to request the common framework for debt restructuring.
He said, “With regard to the debt restructuring, the World Bank works closely with the IMF on debt situation. Nigeria has not asked for the common framework under the G20 process. That process has been slow acting in Chad, Ethiopia and Zambia. There are some signs of movement in Zambia but still challenging. Nigeria and Ghana did not ask for common framework treatment.”
Malpass further noted that there was an ongoing discussion to ensure that this process could help a country to have a standstill on their debts and choose a path forward on debt restructuring, which means they will get a break on debt payment while they decide on how to restructure their debts.
He also said that Nigeria’s subsidy was too large, undermining the government’s revenue, adding that the situation in Nigeria was concerning.
“With regards to subsidies, to the extent that the government can have them be smaller, meaning if you put a cap on gasoline prices, don’t make a nominal cap in the local terms but allow it to be reduced over time. The challenge for Nigeria is that the subsidies are too 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,” Malpass said.
The World Bank Group president further said that some of the challenges in Nigeria included multiple exchange rates and restrictive trade policy.
“Some of the challenges are the dual exchange rates or the multiple exchange rates that are used, which make it very hard to have capital flowing in an efficient way within the country. Also, the trade policy tends to be protective on the import side and restrictive on the export side,” he noted.