…Cautions FG against rising indebtedness to China
From Ngozi Amuche, in Washington DC
The World Bank Group has said that Nigeria should intensify the fight against corruption and strengthen fiscal capacity and diversification of the economy.
It also warned the Nigerian government against the rising indebtedness of the country to China.
Speaking at the ongoing 2019, World Bank Annual Conference in Washington DC, the new Managing Director of the bank, Kristalina Georgieva, said these basic issues confronting the economy must be tackled, in order to ensure that the riches of Nigeria remain in Nigeria.
She, however, stated that financial conditions in Nigeria, which favoured more foreign investments, should attract investments this year.
The World Bank also cautioned against the rising debt profile, especially from China, and also expressed worry over debts in sub-Saharan Africa, which includes Nigeria.
However, Nigeria’s debts – foreign and local- has climbed to over N25trillion based on latest data from the Debt Management Office. Larger percentage of Nigeria’s recent debt exposures are from China.
While fielding questions from journalists after the presentation of the Global Financial Stability Report, International Monetary Fund’s Deputy Division Chief, Monetary and Capital Markets Department, Evan Papageorgiou, said the issue of non-Paris Club creditors was one of the issues identified as potentially creating some instability or some vulnerabilities.
He noted that, “Not that the debt itself creates problems. We examine some issues that debt has to be used for productive purposes, but usually debt that is given under non-Paris Club or multilateral types of agreements, more broadly in a lot of low-income countries, particularly a lot of Sub-Saharan African countries, the issue of debt vulnerabilities is becoming more and more prescient.”
He added that already “the IMF’s evaluation, in more than a dozen countries that are either in distress or in high risk of debt distress.”
He also noted there were issues of either collateralization of that debt or the type of this debt might create a more difficult way of resolving it down the line through debt restructuring, for example.
IMF Financial Counsellor and Director of the Monetary and Capital Markets Department, Tobias Andrian, noted that “capital flows to Sub-Saharan Africa have to be dealt with in a responsible manner.”
He expressed optimism over more flow of investments into Africa.
“Flows of investment to Sub-Saharan Africa have been strong and are expected to reach record highs this year; so global financial conditions are favorable to countries such as Nigeria at the moment,” he said.
According to him, “Issuing bonds in hard currency and in domestic currency is currently possible because of the favorable global financial conditions.
“Of course, it is key to what countries such as Nigeria are doing with those borrowed funds, and undertaking structural reforms to develop the economy is key.
“Capital flows to Sub-Saharan Africa has to be dealt with in a responsible manner, and so when we look across countries in Africa, there is a variety of approaches, and so we do see an increase in overall debt levels, and there are both costs and benefits to that.”
The IMF also noted that Nigeria had a large exposure to domestic debts, particularly from Central Bank bills, adding that there were a lot of higher redemption and more roll overs going forward.
