. Insists Nigeria’s debt is sustainable
The Federal Government said it has approached the World Bank to secure another $1.5 billion loan, even as it insists that Nigeria’s debt is sustainable.
Minister of Finance and Coordinating Minister of the Economy, Wale Edun, who disclosed this on Saturday, said it is in efforts to address the fiscal gap in the 2023 budget.
Edun spoke with journalists on the sideline of the 2023 Annual Meetings of the World Bank and the International Monetary Fund (IMF) in Marrakech, Morocco.
He said: “On the talks with the World Bank on $1.5 billion budget support, that is correct.
“The World Bank is the number one multilateral development bank helping developing countries or funding developing countries, projects and programmes, and sectors.
“It has free money through either International Development Association (IDA). It is for the poorer countries and right now I think we qualify as one of the countries that can borrow in the normal window of World Bank funding but also some concessionary IDA funding and that means that effectively the interest rate will be zero.
“In this particular case, it has long been in the pipeline, and we are hoping that funding will come through soon. There is a Federal Executive Council meeting on Monday (today) that should be able to discuss this as well as other initiatives for financing on reasonable terms.
“We have talked about the high cost of money – the World Bank money is the cheapest.
“Regarding the opportunity to attract investments, there have been many conversations, and, in all honesty, the narrative is that with the bold courageous steps that Nigeria has taken, we are now at the forefront, almost number one on people’s list when they want to look at where to invest; that is now the narrative.
“Nigeria is definitely on the right path; we have taken the right decision for the economy to recover and for it to attract Foreign Direct Investment (FDI) and as well, I will add, domestic investment to recover full economic growth, job creation and at the same time, achieve inclusivity of women and young people.
“We’ve talked about tax reform, and that tax reform will include looking at expenditures on taxes, waivers, duties, and tax exemptions. So, that is very much part of the plan.
“Regarding Ways and Means, President Bola Ahmed Tinubu, even while campaigning as a candidate, President-elect and President, has a commitment not to go beyond the statutory limits.
“One of his priorities is the rule of law – sticking to agreements, sticking to the law. And so, his commitment is to come within the limit for Ways and Means, which essentially means overdraft borrowing from the Central Bank.
“However, having made that commitment and given that direction of travel, I think the idea and commitment is to come within whatever is the statutory limit as soon as possible.”
It (World Bank) has free money through either International Development Association (IDA). It is for the poorer countries and right now I think we qualify as one of the countries that can borrow in the normal window of World Bank funding but also some concessionary IDA funding and that means that effectively the interest rate will be zero.
Debt servicing
Reiterating that Nigeria’s debt situation is sustainable and does not require restructuring, the Minister, however, admitted that the country’s debt service to revenue was high.
According to him, this can be corrected through improved oil and non-oil revenue, adding that the more revenue you earn the more affordable debt servicing will be.
He continued: “Also, we have spent time meeting oil producers and encouraging them to invest further in production, so as to boost revenue as oil prices are relatively high.
“President Bola Tinubu has also inaugurated a fiscal policy and tax reforms committee that is already working on improving revenue generation.
“The committee has a target of moving the country from under 10 per cent tax-to-GDP to 18 per cent within a year. That is also a way of dealing with debt servicing.
“The world we are in now is a world of high interest rates. Debt is becoming unaffordable,” he said.
“These are painful reforms, but there is a set of interventions being rolled out to cushion their effects and improve the well-being of Nigerians,” Edun said.
