IMF douses fears on Nigeria’s rising debts profile

Contrary to increasing fears of negative outcome from Nigeria’s rising external and domestic debts, which many believe are back to pre-2015 levels to fund infrastructure development and budgets, the International Monetary Fund (IMF), yesterday said there is merit in this strategy.

The country’s total external and domestic debts according to the Debt Management Office (DMO), stood at about $18.9 billion, and N15.9 trillion respectively, as at March 2018, which reignited concerns that the country could be headed for another round of financial crisis, saying that servicing cost of over 60 per cent of revenues could be a burden to the country.

But the IMF said the Federal Government’s preference for more external debts relative to domestic has some merits, as Assistant Director, Fiscal Affairs, Catherine Pattillo, argued that “Factors that support Nigeria’s current external debt-to-GDP ratio is low so the external interest payments are relatively low,” adding that “The benefits of that switch is a reduction in overall interest payments and a lengthening of maturities.”

The Director General, DMO, MS Patience Oniha, had earlier dismissed repayment concerns, saying that at 18.2 per cent of Gross Domestic Product (GDP), Nigeria’s public debt remained sustainable, adding, “Our projection is that from two sources, the borrowing should be dropping in the medium term.”

A recent report by global rating agency, Standard and Poor’s (S&P), had also forecast that, “Overall, Nigeria’s gross general government debt stock (consolidating debt at the federal, state, and local government levels) will average 27 per cent of GDP for 2018-2021, comparing favourably with peer countries’ ratios.”