Nigeria’s primary concern with regard to its debt position is the rising cost of debt servicing, according to Abebe Selassie, Director of the IMF African Department, who was speaking during the presentation of the Economic Outlook for Sub-Saharan Africa at the ongoing IMF/World Bank Annual Meetings in Marrakech, Morocco.
He emphasized how difficult it is for Nigeria to raise enough tax income to pay off its debt and make necessary infrastructure improvements. Furthermore, he made it clear that the IMF was unaware of any debt negotiations, debt profiling, or debt restructuring that were taking place in Nigeria.
“When we look at the debt in Nigeria, we sense that the stock is manageable in general, it is the debt servicing that is much more difficult and the debt service is hampered by the country, for not generating enough non-oil tax revenues. And I think that is by far the most important area of work and reform there is for any administration in Nigeria,” Abebe Selassie said.
“In Nigeria, the most important cause of the pressures is the fact that the government does not generate enough tax revenue for all the services it needs to provide. Interest payment as a share of revenue is very high and does not leave much room to spend on other issues that need to be worked on,” he added.
The representative of the IMF commented on the recent development by the Central Bank of Nigeria in easing FX restrictions on the previously prohibited 43 restricted Items, stating that the decision is encouraging as it is expected to strengthen international trade connections.
Additionally, he stated that the FX reforms and the elimination of subsidies are progressing in the correct path and said that budgetary restraint is necessary to assist Nigeria’s efforts to achieve exchange rate stability.
“What is needed, we feel, is making the reforms holistic. So, the exchange rate reforms that the government did were very welcome as it is trying to unify the rates. Similarly, the fuel subsidy will not help or stick unless they tighten monetary policy,” he said.
“Unless you are also doing something to mobilize more tax revenue. So, a holistic package of reforms is what is needed, and we must give a bit of time to the new administration also,” Selassie added.
