World Bank disagrees with FG on Nigeria borrowing spree

The World Bank has disagreed with the Minister of Finance, Mrs. Kemi Adeosun, on the need for the Federal Government to borrow more in order to develop the nation’s infrastructure and stimulate the economy.

A report by Newsrangers said that the  World Bank  Senior Economist, Gloria Joseph-Raji, made the position known in Abuja while speaking to its correspondent.

The online platform said JOSEPH-RAJI spoke to its correspondent on Monday.

The World Bank official said   the cost of borrowing or paying interest on Nigeria’s debt was not sustainable as revenues to make such payment had dried up.

She spoke with our correspondent on the sidelines of the lunch of Africa Pulse, a biannual report on Africa.

Adeosun said on Sunday at a press briefing rounding off the World Bank/International Monetary Fund annual meeting in Washington DC, United States that Nigerians would have to tolerate more borrowings in the short term for the government to deliver critical infrastructure.

But Joseph-Raji said that dwindling revenues had raised a concern both at the Federal Government and the World Bank on sustainability of Nigeria’s borrowings as debt-to-revenue ratio had increased by 25 per cent within a period of one year.

She said in 2015, the country’s debt to revenue ratio stood at 35 per cent but rose to 60 per cent by 2016, reflecting a reduction in government revenues and rising debt profile, thereby raising a question about the debt sustainability.

Joseph-Raji said, “Nigeria has a decent debt-to-GDP ratio, currently about 19 per cent. It is the debt to revenue ratio that is of concern and that rate is a sustainable issue. That is of concern to us and that is also of concern to the government.

“The government is aware that the debt is looking more unsustainable from the point of debt service to revenue ratio. The estimate we had for last year at the federal level was about 60 per cent. That is coming from about 35 per cent in 2015.

“That reflects the substantially lower revenues that Nigeria recorded last year. Even among the state governments; we know that a lot of state governments are servicing a lot of debts from their federation account allocation. So, there is really going to be a sustainable issue emerging.”

The World Bank expert said she was concerned about the sustainability of the country’s debt, especially the huge domestic borrowing with high interest rate, which prompted the Debt Management Office to come up with a strategy to rebalance the country’s debt portfolio.

She said, “The DMO released the Debt Management Strategy 2016 to 2019 last year. The strategy was to rebalance the debt portfolio from more of domestic now to more of foreign. That is because of the debt servicing cost.

“Before now we had a debt portfolio of about 80 per cent domestic to 20 per cent external. We know that the debt servicing cost of domestic debt is really high. Treasury bill is an average of 18 per cent; the FGN bonds, from 16 per cent. The government is trying to rebalance its portfolio with foreign debt, which has much lower interest rate than domestic debt. That is why this year you have seen them go for Eurobonds, with a total of $1.5bn in the first quarter of the year. They also did Diaspora bond of $300m. If you look at the yield on those bonds, they are much less than 10 per cent.

“The government is aware that there is a sustainable issue and that is what they are trying to correct by taking more foreign debt.”

Joseph-Raji said in the light of expenditure exceeding revenue, government should borrow, but it should borrow in a manner that was sustainable.

Also speaking on the issue in an interview with our correspondent, the Head of Abuja office of Social Action, a Non-Governmental Organisation active in debt relief advocacy, Mrs. Vivian Bellonwu-Okafor, said the government needed to think about better ways of managing the economy.

She said borrowing $3bn from abroad to refinance local debts was replacing one evil with another evil.

Bellonwu-Okafor said foreign borrowing would invariably lead to annual debt servicing in hard currency to foreign lenders.

She said, “The $3bn debt refinancing arrangement, as proposed by the Federal Government, does not solve the country’s rising debt problem; it merely trades one evil for another.

“Borrowing longer-term foreign loans to pay off maturing short-term domestic debt, instead of taking actual steps to gradually reduce and exit debt overhang, is a demonstration of poor economic management.

“Several developing countries have adopted far-reaching domestic strategies to mitigate the effects of international market shocks and global financial crisis. While countries like Malaysia are increasing internal investments to develop their economies and make them as independent and vibrant as possible, rather than shrink deeper into global financial waters, Nigeria seems to be doing quite the opposite; preparing frameworks and opportunities for more foreign exchange and capital flight from the country in annual debt servicing.”

In another telephone interview with our correspondent, a financial expert and associate professor, and Head of the Department of Banking and Finance, Nasarawa State University, Dr. Uche Uwalaka, said there was no doubt that Nigeria’s debt to revenue ratio was high.

According to him, the use of the index is a better way to measure a country’s capacity to pay debt and interest.

Although he said that the country hardly had any better option than to borrow, he insisted that debts should be tied to projects that were self-liquidating.

He said, “There is no doubt that the country’s debt burden is high going by the debt to revenue ratio. There are other measures of the debt burden such as the debt-to-GDP ratio, which is currently around 18 to 19 per cent.

“External debts are cheaper to service especially when they come from multilateral sources. The attention of government has shifted to foreign debt. I am in support of government’s plan to borrow $3bn to refinance some local debts. What is important is that the National Assembly and other agencies should focus on is the monitoring of what we do with foreign loans. This is because foreign loans also have their own risks such as shock in exchange rates.”

Uwalaka said other options to borrowing such as sale of national assets, increase in taxes and printing of money were not viable in the present circumstances of the country

en

SOURCE :The Nigerian Voice (business)

35 thoughts on “World Bank disagrees with FG on Nigeria borrowing spree

  • 21st November 2020 at 7:09 pm
    Permalink

    I think that what you said made a great deal of sense.
    However, what about this? what if you composed a catchier post title?
    I mean, I don’t wish to tell you how to run your
    website, however suppose you added a headline that makes people want more?

    I mean World Bank disagrees with FG on Nigeria borrowing spree
    – OfofoZone is a little boring. You ought to peek
    at Yahoo’s front page and see how they create article headlines to grab people to click.
    You might try adding a video or a pic or two to get people excited about what you’ve got to say.
    Just my opinion, it would make your posts a little
    bit more interesting.

    Reply
  • 24th November 2020 at 3:56 pm
    Permalink

    Jouw persoonlijkheid is zo uniek dat ik er geen andere heb gelezen. Bedankt voor de post als je de kans
    hebt, Ik denk dat ik deze pagina’s gewoon ga bookmarken.

    Reply
  • 14th December 2020 at 6:02 am
    Permalink

    I used to be suggested this website via my cousin. I’m not certain whether this post
    is written by him as no one else realize such special about my
    trouble. You are amazing! Thank you!

    Reply
  • 18th December 2020 at 2:40 pm
    Permalink

    I’m excited to find this website. I wanted to thank yoou for ones time just for this wonderful read!!
    I definitely really liked every little bit of it and I have you book marked to look at new stuff on your web site.

    My page: gloucester conservatories (Lorrine)

    Reply
  • 27th December 2020 at 5:53 pm
    Permalink

    ???, ??? ???? ?????? ??? ?? ??????? ?????? ?????? ????? ????? ????, ?????, ??? ????? ????…

    Reply
  • 28th December 2020 at 12:19 am
    Permalink

    Perhaps you should also a put a forum site on your blog to increase reader interaction.*“`:

    Reply
  • 29th December 2020 at 6:26 pm
    Permalink

    Good blog! I truly love how it is easy on my eyes and the data are well written. I’m wondering how I could be notified when a new post has been made. I’ve subscribed to your RSS feed which must do the trick! Have a great day!

    Reply
  • 1st January 2021 at 8:10 pm
    Permalink

    Thank you for sharing your stuff on blog. it’s probably that we have similar interests. something are very useful to me.

    Reply
  • 2nd January 2021 at 1:35 am
    Permalink

    Very good written article. It will be helpful to anybody who usess it, including myself. Keep up the good work – can’r wait to read more posts.

    Reply
  • 4th January 2021 at 8:14 pm
    Permalink

    Fashion Courses Online… […]below you’ll find the link to some sites that we think you should visit[…]…

    Reply
  • 15th January 2021 at 8:08 am
    Permalink

    Oh my goodness! Impressive article dude! Thanks, However I am going through troubles with your RSS.
    I don’t understand why I can’t join it. Is there anybody else having
    similar RSS problems? Anyone that knows the solution can you kindly respond?
    Thanks!!

    Reply
  • 19th January 2021 at 1:13 am
    Permalink

    What’s Happening i am new to this, I stumbled upon this I have found It absolutely useful and it has aided me out loads. I hope to contribute & help other users like its helped me. Great job.

    Reply
  • 31st January 2021 at 9:12 pm
    Permalink

    Excellent, what a weblog it is! This website gives helpful data
    to us, keep it up.

    Reply
  • 8th February 2021 at 3:29 pm
    Permalink

    ufabet เว็บไซต์พนันออนไลน์ที่ให้บริการมากมายครบวงจร ตั้งแต่พนันบอล สล็อต บาคาร่า คาสิโนออนไลน์ เป็นเว็บครบวงจรสำหรับนักเสี่ยงดวงที่อยากลงทุน ตัวเว็บไซต์เป็นภาษาไทยใช้งานง่าย มีระบบที่ปลอดภัย
    ใช้งานง่าย และก็เว็บไซต์ของเราพร้อมให้ บริการ 24
    ชั่วโมง ให้กับลูกค้า

    Reply
  • 8th February 2021 at 11:45 pm
    Permalink

    Undeniably believe that which you said. Your favorite justification seemed to be on the web the simplest thing to be aware
    of. I say to you, I certainly get irked while
    people consider worries that they just don’t know
    about. You managed to hit the nail upon the top and defined out the whole thing without having side-effects ,
    people could take a signal. Will likely be back to get more.
    Thanks

    Feel free to surf to my web blog – Negative Product
    Reviews Examples [https://www.Minerva.gallery]

    Reply
  • 11th February 2021 at 9:37 pm
    Permalink

    If you would like to improve your know-how simply keep visiting this site and be
    updated with the most up-to-date news posted here.

    Reply
  • 18th February 2021 at 2:05 am
    Permalink

    If some one wants to be updated with most up-to-date technologies after that
    he must be pay a quick visit this web site and be up to date everyday.

    Also visit my page … camping in spanish (Thorsten)

    Reply
  • 21st February 2021 at 1:13 pm
    Permalink

    If you are going for finest contents like I do, just pay a quick
    visit this website all the time because it gives quality contents, thanks

    Reply
  • 21st February 2021 at 4:22 pm
    Permalink

    It’s a pity you don’t have a donate button! I’d definitely donate
    to this excellent blog! I suppose for now i’ll settle for
    bookmarking and adding your RSS feed to my Google
    account. I look forward to fresh updates and
    will talk about this website with my Facebook group. Talk
    soon!

    Reply
  • 4th March 2021 at 11:07 pm
    Permalink

    Thanks for sharing such a good idea, article is good, thats why i have read
    it completely

    Reply

Leave a Reply

Your email address will not be published.