- As Nigeria’s Debt ‘Profile’ Grows
By Kolawole Ojebisi
As dozens of sub-Saharan African countries continue to borrow billions of dollars from international financial institutions, including the African Development Bank (AfDB), the World Bank and the International Monetary Fund(IMF), there are risks that some countries may be unable to pay back, the IMF has warned.
This warning is contained in the IMF latest global financial stability report update released on Thursday. The IMF cautioned that the amount so far released as loans by international financial institutions to sub-Saharan African countries and emerging markets generally during the COVID-19 pandemic is unprecedented.
According to the Washington Based Fund, over US $10billion has been disbursed in loans to close to 30 countries in sub-saharan Africa to respond to COVID–19 pandemic.
The International fund noted that the amount is “unprecedented and 10times more than what the IMF has been disbursing to the sub-saharan Africa annually on an average of US$1billion each year.”
These loans become more tempting because they are without the stringent conditions that have accompanied previous borrowings in pre-COVID-19 era. The interest rate is also lower and that fuels the appetite for more financial assistance.
While the reason given for these escalating borrowings is to fight the lethal virus and reposition economies devastated by the pandemic for growth, the IMF advised countries to spend the COVID–19 funds wisely as well as keep receipts for accountability and records .
While reacting to the heavy borrowings by African countries, Mr Gerry Rice of the Communication Department at the IMF reiterated the organization’s position on May 22,2020.
Rice said, “You might have heard the Managing Director, Kristaline Georgieva and others at the IMF say we are urging countries to ” keep the receipts. Spend the money but keep the receipts and that means, you know, ensuring the resources are properly used.”
Meanwhile, in its stability report released on Thursday, the IMF cautioned that the debt levels were rising and potential credit losses resulting from the insolvencies could test bank resilience in some countries amid the COVID– 19 pandemic.
According to Tobias Adrian and Fabio.M. Natalucci, the authors of the report, ” some emerging markets and frontier economies are facing refinancing risks and lower-rated countries have started to regain access to markets slowly.”
The report also said, ” pre-existing financial vulnerabilities were being laid bare by the pandemic.”
In Nigeria, however, Minister of Finance, Budget and planning, Mrs Zainab Ahmed, has said the country would not request a delay in debt-service payments this year from bilateral and commercial creditors. She reportedly disclosed this during a call-in session forum with investors organized by Citigroup on Wednesday.
She said, ” Nigeria is not planning to ask for debt repayment deferment for our commercial loans or for our bilateral loans from our bilateral creditors. ”
It was gathered that nearly half of Nigeria’s outstanding external debt is with multilateral lenders. According to the debt management office, the World Bank Group is Nigeria’s top creditor with $ 10.1 billion in loans. Beijing-based Export-Import Bank of China is the second largest single creditor with loans totaling $3.2billions, while Eurobonds account for $10billion or 39percent of external debt.
The latest ‘handout’ came on Thursday from World Bank in the form of Intervention. The world bank approved a $750million for Nigeria. The intervention, according to the Washington-based international financial institution, is part of the bank’s ‘Power Sector Recovery Operation (PSRO).
