Nigeria not in debt distress, but must chase revenues – IMF

From Marrakech, Morocco || The International Monetary Fund (IMF) said on Friday that Nigeria is not in debt distress at the moment even though public debt has reached a record N87trillion, and is estimated to cross 37 percent of GDP by the end of this year.

But the concern really is that revenue generation for Africa’s largest economy is incredibly low, raising serious pressures on government incomes and efforts to meet debt service obligations.

Read also: Nigeria 2023 growth seen slowing to 2.9% IMF

Abebe Aemro Selassie, director of the African Department, at the IMF, stated this during the launch of the October 2023 Regional Economic Outlook (REO) at the week-long Annual meetings of the IMF and World Bank in Marrakech, Morocco.

A key message during the meetings has been surging global debt, and according to both the IMF and World Bank, Nigeria, and other low-income countries must put in place policies that encourage increased revenue mobilization, transparency, and better spending of public resources, as well as stop unnecessary tax concessions which drain government revenues and limit growth.

These measures, they say will help the avert risk of debt distress, particularly for Sub-Saharan Africa which the fund now estimates will slow to 3.3 percent, and Nigeria, 2.9 percent in 2023.

“The assessment of debts should not be based on the nominal value of a debt stock but rather on how it relates to many other economic variables. Yes, it’s at the highest level because you measure it in naira terms but as a ratio to GDP and many other indicators, that is what you have to look at.

“When you look at the debt in Nigeria, our sense is that the stock is manageable in general but it is the debt servicing that is much more difficult. And the debt servicing is hampered by the country not generating enough non-oil tax revenues. And I think it is by far the most important area of reform and work for any administration in Nigeria,” Selassie responded to a BusinessDay concern at the press briefing.

Also speaking on the 8-year old CBN policy which restricted some 43 items from accessing foreign exchange for their imports, Selassie said the reversal is positive and helpful in recalibrating Nigeria’s economy.

He said: “On the trade restrictions, our view has always been in Nigeria and in many other cases is that our economies now are so complex, so sophisticated, and I do not think that these kinds of restrictions work.

Read also: Economic growth in Sub-Saharan Africa to drop by 3.3% in 2023- IMF

“The best way to manage modern economies is for government authorities to have fiscal and monetary policies deliver is not say I don’t like these goods and I don’t want them to come in.

“That kind of creates unhealthy distortion and of course, there are tax policies you can also use if you want to lean against certain types of imports and so on. But in general, I think the direction the CBN has moved is a helpful one.”