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AMECHI Ogbonna, Washington DC , USA
Amid the hue and cry over Nigeria’s rising debt profile, the International Monetary Fund (IMF), on Wednesday, said the largest African economy maintains good fundamentals to enable it borrow more if it can eschew mismanagement.
Speaking at a briefing on “Global Financial Stability Report” during the ongoing World Bank Meeting/IMF Spring meetings, Tobias Adrian, Financial Counsellor and Director, Monetary and Capital Markets Department, IMF, who said though the conditions were good for Nigeria and other sub-Saharan African countries to get funding to invest more, especially to improve infrastructure, expressed worry that these favourable conditions may not subsist given fluctuating macro-economic conditions, which could change “at some point”.
“So Nigeria has been borrowing in international markets. But we worry, so on the one hand, that is very good because it allows Nigeria to invest more; but on the other hand, we do worry about rollover risks going forward.
“At the moment, funding conditions in economies such as Nigeria and other sub-Saharan African countries are very favourable but that might change at some point. And there is a risk of rollovers and there is a risk of whether these needs for refinancing can be met in the future.”
Adrian also pointed out that policy uncertainties and bad decisions were the root causes for financial distress in countries and advised that sub-Saharan African countries should embrace more of long-term borrowings than short-term risk assets.
“What we have seen in the past two years is that policy uncertainty has been at historically elevated levels. And that kind of policy uncertainty in many countries around the world is a risk factor for financial stability,” he stressed, adding that recent work at the fund has shown that this kind of elevated policy uncertainty forecasts downside risk growth over an above the information that is in market -based measures.
He called for better and more strategic collaboration between the fiscal authorities and monetary authorities if Nigeria must achieve its long-term goals.
However, Nigeria’s ballooning debt profile just caught the attention of international financial agencies, as the country’s budget deficit continues to escalate.
Estimates suggest that every Nigerian citizen from a day old owes an estimated debt of N105,556 or N289 a day. This becomes clear when consideration is taken of the recent Debt Management Office’s (DMO)’s announcement that Nigeria’s total debt stock had reached N24.4 trillion.
He said: “Amid rising downside risks to global growth, policymakers should aim to avoid a sharper economic slowdown, while keeping financial vulnerabilities in check. Policymakers should clearly communicate any reassessment of the monetary policy stance that reflects either changes in the economic outlook or risks surrounding the outlook. This will help avoid unnecessary swings in financial markets or unduly compressed market volatility.”
