Nigeria Has Capacity to Repay Its Debts, Our Worry Is Fiscal Deficit - IMF

By Emmanuel Addeh

The International Monetary Fund (IMF) yesterday said although it doesn't doubt Nigeria's ability to repay its soaring debts, it was concerned about the country's rising ratio of debt-to-Gross Domestic Product (GDP).

Speaking on Arise News Channel, THISDAY's broadcast arm, last night, Resident Representative of the global organisation in Nigeria, Ari Aisen, stated that though current projection of debt-to-GDP ratio was 36 per cent, it could actually rise to 43 per cent.

Describing the figure as "very large", he explained that as an institution, the IMF would continue to highlight the need to properly manage the debt dynamics even as interest rates begin to climb worldwide.

Aisen explained that if there was a change in the current dynamics, Nigeria could be caught up in a very difficult position.

The IMF representative stated that the multilateral institution would support the federal government's plans to raise tax-to-GDP revenue in the coming years.

"The capacity to repay as I was saying is not really an issue. The record is very strong, both in terms of private obligations. And we actually saw at the end of last year, that the Eurobond issuance was oversubscribed, it was a success.

"So I want to allay those concerns and put it to rest. But I think it's important to recognise that because the fiscal deficits have been high and they need to be financed, and the trend of the debt to GDP ratio is increasing.

"We are projecting 36 per cent and it may go up to 43 per cent. Still not an alarming level, but very still large, already large.

"So , it's our job as an institution to highlight that eventually, that may become too large to bear. And be reminded also that debt dynamics are very important. Nigeria has been enjoying low interest rates and worldwide and around the world, because of inflationary concerns, interest rates are starting to climb," he explained.

Stressing that the country needs more fiscal space to be able to pay salaries, spend on security, education and health, he noted that the IMF was committed to backing the authorities to strengthen tax administration, broadening the tax base and improving compliance on the various taxes.

He added that while there's been a bit of progress in some areas, in other cases, there was more work to be done, especially in the area of governance and transparency.

Aisen noted that budget lines that allowed tracking of spending committed to COVID-19, created by the ministry of finance was a good move, to ensure more clarity about what is being done with the funds.

"But unfortunately, there have been technical difficulties in terms of access and even the quality at some point of those public information that needs to continue to be improved, because it's been a bit uneven. Not everyone and all the time, can have access to that information.

"So we are calling for the authorities to really be mindful and finish the job that already started and probably the most difficult part that has already been done, which is creating those lines, it's in the budget.

"And it's not only the federal budget or even state budget information available that should be available for everyone at all times. So, this is just one example of how to boost and enhance these important commitments, that at the end of the day will be to the benefit of Nigeria," he added.

In terms of the exchange rate, the IMF reiterated the recommendations which Aisen stated had been consistent over the years and which he agreed the Central Bank of Nigeria had done some movements in the right direction.

He argued that by eliminating other FX windows that still exist, more transparently, it would help the clarity of exchange rate policy, including unifying all the rates.

" It's important to make sure that you have a reasonably flexible system that allows for periodic adjustments, so that the rate can clear the market. Now, that cannot be done by itself in isolation.

"It needs to be supported by other policies and by appropriate context , political environment, everything needs to be conducive to support a move like that otherwise, it will be like previous experiences," he maintained.

This article originally appeared on This Day

Photo: This Day