October 14, (THEWILL) – The World Bank has said Nigeria and Ghana are yet to approach the bank as well as the International Monetary Fund (IMF) for the framework on debt restructuring.
President of the Group, David Malpass clarified the statement by the Minister of Finance, Budget and National Planning, Zainab Ahmed that the country is already in talks with the multilateral institutions on restructuring Nigeria’s debt.
Ahmed, speaking on the sidelines of the 2022 IMF/World Bank annual meetings in Washington on Wednesday said that one of the objectives of the Nigerian delegation at the meetings was to engage the Brenton Woods institutions on the restructuring of its debts.
“We have been engaging the financial institutions to look at the opportunity to restructure our debt to further stretch the debt service period to give us more fiscal relief. Those are some of the things we want to achieve in this meeting” she had stated.
However, responding to questions if the debt restructuring request by Nigeria will be considered, Malpass said, many countries except Nigeria and Ghana are yet to approach both the IMF and the World Bank for a common framework for restructuring their debt.
“With regard to debt restructuring, the World Bank works very closely with the IMF on debt situations, Nigeria has not asked for the common framework under the G20 process.
“That process has been slow acting in Chad, Ethiopia, and Zambia and there are some signs of movement on Zambia, but it is still challenging. So Nigeria and Ghana both did not ask for a common framework treatment.
“Kristalina (IMF Managing Director) and I were talking yesterday with the group about if countries could have a situation where the common framework paused or allowed the country to have a standstill on their debt, that would help the countries choose their path forward on debt restructuring, and that would mean they would get a break on debt payments while they’re working out a restructuring agreement with the world but Nigeria didn’t go, it hasn’t gone that route”, Malpass said at a Press Briefing on Thursday.
In a swift reaction, the minister of Finance, Budget and Planning, Zainab Ahmed said yesterday that, the country is working on renegotiating its debt obligations to see how it can stretch it out to ease the debt burden of Nigeria, saying restructuring is not in the works.
This follows an interview she granted on the sidelines of the ongoing 2022 World Bank/ International Monetary Fund annual meeting heldholding in Washington DC.
Speaking during a Debate on the Global Economy, Ahmed said “we are not restructuring our loans, but we are looking at options of how we can stretch out including buying back some of our bonds when we have the resources to do that.”
Ahmed, who was responding to a question by CNN anchor Richard Quest on if the country was feeling punished for its debt, said “we are actually feeling the pressures, the market costs is too high for us to come out.
“We would explore the markets in the near future and also because inflation is going up and is going to stay up for longer and also our debt service obligations in foreign currency are increasing. And what we have decided to do is not to wait for it to happen we have to start looking at how do we better manage our liabilities.
“For example, our domestic liabilities will be able to shift our loans from short-term to medium and longer-term tenure. We have to do the same for international borrowings as well, bilateral loans and even some concessionary loans that the periods could be stretched to give us more fiscal room while we are working to increase revenue. To improve on our revenue to debt service, you still need to be able to renegotiate and stretch out repayment implications.”
The IMF Managing Director, Kristalina Georgieva, on her part, noted that Nigeria is on the right part, saying “that is what we are recommending for countries. When you see the dark clouds on debt financing, don’t wait. Look at ways in which you can extend maturities, you can improve the matching of currency obligations with what you are earning yourself. In that sense, what Nigeria is doing in this current environment is exactly what you should be doing”.
Meanwhile, the World Bank president, Malpass, reiterated that the challenges for Nigeria remain its dual exchange rate, trade policies, and subsidies, which it said have continued to eat into the country’s revenues despite a global oil bloom.
He added, “Some of the challenges in Nigeria that I have talked about and been involved with them for some time is the dual exchange rate or the multiple exchange rates that are used which makes it very hard to have capital flowing in an efficient way within the country.
“Also, the trade policies tend to be protected on the import side and restrictive on the export side. So we would work with the IMF on an assessment of the depth sustainability of Nigeria but then it would also be up to Nigeria itself to interact with the various creditors, which include bondholders and includes official creditors that are engaged in Nigeria.
“With regards to subsidies to the extent that governments can have them be smaller meaning if you’re putting a cap on gasoline prices don’t make that a nominal cap in the local currency terms but allow it to be reduced over time.
“So the challenge for Nigeria is that the subsidies are so 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 ended up hurting the finances of Nigeria because of that large subsidy that is provided.”