The President of the World Bank Group, David Malpass, disagrees with the claim made by the Minister of Finance, Budget, and National Planning, Zainab Ahmed, that the country has already begun discussions with multilateral organizations about restructuring Nigeria’s debt. Malpass claims that both Nigeria and Ghana have not yet contacted the bank and the International Monetary Fund (IMF) for the framework on debt restructuring.
On Wednesday, Ahmed noted that one of the goals of the Nigerian team at the meetings was to work with the Brenton Woods institutions on the restructuring of its loans. Ahmed was addressing on the margins of the 2022 IMF/World Bank annual meetings in Washington.
“We have been working with the financial institutions to examine the possibility of restructuring our debt to lengthen the debt service period even more and provide us with further financial relief. We want to accomplish some of those things at this meeting, she had said.
However, David Malpass, the president of the World Bank, stated that many nations, with the exception of Nigeria and Ghana, have not yet contacted the IMF and the World Bank for the common framework on debt restructuring when asked if the request for debt restructuring made by Nigeria will be taken into consideration.
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Malpass said, addressing at the World Bank’s press briefing on Thursday, “Nigeria has not requested the shared framework under the G20 process, but the World Bank works very closely with the IMF on debt crises.”
While there are some signs of progress in Chad, Ethiopia, and Zambia, the process has been difficult and slow to advance. Therefore, neither Nigeria nor Ghana requested a single framework treatment. IMF Managing Director Kristalina and I were discussing yesterday with the group how if countries could be in a position where the common framework stopped or permitted the country to have a standstill on their debt, that would help the countries decide how to proceed with debt restructuring and would also mean they would receive a break on debt payments while they were negotiating a restructuring agreement with the rest of the world, but Nigeria didn’t go, it hasn’t taken that route.
In a prompt response, Zainab Ahmed, the minister of finance, budget, and planning, stated yesterday that restructuring is not in the works and that the nation is focusing on renegotiating its debt obligations to see if it may lengthen them in order to lessen Nigeria’s debt burden.
This comes after an interview she gave outside the World Bank/IMF annual meeting that is currently taking place in Washington, DC.
Ahmed added, “We are not restructuring our loans, but we are looking at options of how we can extend out, including buying back some of our bonds when we have the capacity to do that.” Ahmed was speaking during a debate on the global economy.
When asked if the nation was being penalized for its debt by CNN anchor Richard Quest, Ahmed responded, “We are genuinely experiencing the strains, the market expenses are too high for us to come out.
“We would investigate the markets in the near future and also because inflation is rising and will continue to rise for a longer period of time and also because our commitments for debt service in foreign currencies are growing. And instead of waiting for it to happen, we’ve decided to start thinking about how we might manage our liabilities more effectively.
For instance, our domestic liabilities will have the power to change the tenor of our loans from short to medium to lengthy. The same holds true for bilateral loans, foreign borrowings, and even those loans with concessions that could have their terms extended to allow us greater fiscal leeway as we try to boost revenue. You still need to be able to renegotiate and delay repayment obligations if we are to increase our revenue to debt service.
Kristalina Georgieva, the managing director of the IMF, stated that Nigeria is on the correct track, adding that “that is what we are advising for countries. Don’t wait if you notice ominous clouds over debt finance. Consider options to extend maturities and to better align your foreign exchange liabilities with your personal income. In that regard, you should be acting just like Nigeria is acting in the current climate.
Malpass, the president of the World Bank, reaffirmed that the issues for Nigeria continue to be its dual exchange rate, its trade policies, and subsidies, which it claimed have continued to eat into the country’s earnings despite a boom in global oil prices.
The dual exchange rate or the various exchange rates that are used, which make it very difficult to have cash flowing in an efficient way within the country, are some of the difficulties in Nigeria that I have discussed and been associated with for some time.
Additionally, trade rules frequently favor import protection over export restriction. Therefore, we would collaborate with the IMF to examine Nigeria’s deep sustainability, but it would also be up to Nigeria to communicate with its numerous creditors, including bondholders and official creditors active in Nigeria.
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Regarding subsidies, to the extent that governments can control them, this means that if you put a cap on fuel prices, you should enable it to be gradually reduced over time rather than making the cap a nominal one in local currency terms.
The issue for Nigeria is therefore that the subsidies are so substantial that they reduce the money the government receives from the state-owned oil business. Nigeria is in a worrying scenario as a result of the enormous subsidy that is given, which caused the increase in oil prices that happened earlier this year to affect the country’s budget.
