Nigeria not high-debt risk nation - DMO

The Debt Management Office (DMO) says Nigeria is not a high-risk nation as erroneously reported on Wednesday, August 11, 2021, captioned ‘World Bank lists Nigeria, nine others high-debt risk nations’.

In the publication, it was stated that the World Bank has classified Nigeria as one of the top 10 ‘high-debt risk nations’ in the International Development Association (IDA) Audited Financial Statement for the Fiscal Year 2021 (July 1, 2020-June 30, 2021) published on Monday, August 9, 2021.

According to the debt management office, the publication is not only false and misleading but also suggests an inadequate understanding of the essence of the World Bank’s Report.

In a statement made available to newsmen, the DMO observed that the World Bank’s report was an assessment of the performance of IDA and not the performance of the IDA loans nor the debt repayment capacity of the beneficiaries of IDA loans.

It explained that the World Bank through IDA gives concessional loans to poor and developing countries to help them achieve improvements in growth, job creation, poverty reduction, governance, the environment, climate adaptation and resilience, human capital, infrastructure, and debt transparency. Nigeria is a beneficiary of IDA loans.

“It is important to re-emphasize that the World Bank’s report, which was misrepresented by the newspaper, was focused only on the composition of IDA’s loan portfolio and did not make any reference to the debt sustainability of the top 10 beneficiary countries of IDA loans, such as India, Pakistan, Nigeria, Kenya and Ghana that the newspaper erroneously referred to as ‘high-debt risk nations’.

“IDA loans are typically for tenors of 30-40 years, grace period (moratorium on principal repayment) of 7-10 years and service fee of only 0.75 per cent,” it stated.

The highly concessional nature of IDA loans, according to the DMO, satisfies the requirements of the provision of section 41 (1)(a) of the Fiscal Responsibility Act, 2007, which states that government at all tiers shall only borrow on concessional terms with a low-interest rate and with a reasonably long amortization period.

The cost of IDA loans, which is the service fee of 0.75 per cent, is considerably low, thereby moderating the cost of debt service, it said.

“The DMO wishes to state that Nigeria’s IDA’s debt stock as of June 30, 2021, was $11.7 billion. IDA loans represent one of the most favourable borrowing options for countries like Nigeria and is also consistent with the Medium Term Debt Management Strategy of the Federal Government,” the DMO statement clarified.