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It’s time to address Nigeria’s debt service/revenue ratio, IMF tells FG

By Emma Ujah, Abuja Bureau Chief

ABUJA—THE International Monetary Fund, IMF, yesterday, asked the Federal Government to to take steps to address Nigeria’s rising debt service/revenue ratio.

IMF

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.The IMF Senior Resident Representative in Nigeria, Mr. Amine Mati, who spoke at the public presentation of the 2018 “Regional Economic Outlook: Sub-Sahara Africa, Capital Flows and the Future of Work”, in Abuja, said:  “Nigeria’s Debt /GDP ratio at between 20 and 25 per cent is quite low but debt servicing which takes about 50 per cent of revenue is certainly high.”

He said the regional average was worse than the Nigerian scenario, with Debt/GDP across Sub-Sahara Africa ranging between 35 and 57 in the past five years.

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He said interest payment had become a major challenge for the affected countries as, according to him, “a lot more of the resources are going into paying interests and there is less to spend on capital expenditure.”

The IMF chief point out that massive revenue mobilization remained the only way to address the challenge but noted that African nations, especially Nigeria, was not doing enough in that regard.

Rather than mobilizing more revenue, he said the current strategy had been to cut expenditure in an economy with a very poor rate of spending.

He said “adjustment has relied on spending compression rather than revenue mobilization,” and that the nation had huge revenue potentials that remained untapped.

On how to deal with financial flows, Mati noted that portfolio inflows could be very volatile and more associated with consumption than investment in the real sectors of the economy.

DMO to adopt fresh strategy on foreign exchange risks

In her remarks, the Director-General of the Debt Management Office, DMO, Ms. Patience Oniha, disclosed that the organization was working towards focusing more on foreign exchange risks strategy, especially with the rising interests rates in the United States and other advanced economies.

She said:  “Some people have raised concerns about the exchange rate risks on our external borrowing.  For instance, they say if the exchange rate moves to N400/$1 in the next five years, how would we handle it?

“My answer is that before, the share of the external debt was small, oil prices were good, production was good, so, really, there was no need to be worried.

“But now there is need to focus on that. In the new plan we have, there is huge focus on risks, portfolio risks, contingent liability risks and interests risks. Before, we were not focused on risk management. We have even asked for assistance from the IMF and the US Treasury  in designing and training.”

 


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