The minister of finance, budget and national planning, Zainab Ahmed, says the federal government is considering tapping into the newly created fund by the International Monetary Fund (IMF).
Ahmed said this on the sidelines at the ongoing IMF- World Bank meetings on Wednesday, October 12, 2022, in Washington, DC.
FG seeking more time to pay debt: The finance minister also said the federal government has been engaging financial institutions to look into the country’s portfolio debt to restructure and further stretch the debt service period to give more fiscal relief.
What she said: “It is a fact that Nigeria’s debt has increased over the last three to four years, and this increase in debt was occasioned by the different kind of exogenous shocks that the country faced, which is not unique to Nigeria,” she said.
“The last drawing we had from the IMF is the second round of special drawing rights (SDRs) that was provided for all the member countries. The IMF recently offered a food security package that countries can draw, and it is equivalent to about 50 percent of their SDRs.
“We have not taken a decision to draw on that. We have to examine the requirements, terms and conditions, to see if it will be safe for us to draw because we don’t want to be drawn into an IMF programme.
“If they work for us, we will now decide to take it because the funds can certainly be useful in terms of adding to our reserves and coping with the challenges the country is facing.”
Flooding will cause more stress to the food system: She said there are signs that the recent flooding in the country would cause more stress to the food system, affecting harvest and prices.
“The floods that have been happening are going to cause more stress on our food system. We realise that the floods are currently destroying crops and therefore the harvest that is expected will be much less, and it will mean that more of our people will struggle to afford food,” she added.
65% of Nigeria’s earnings will be used to service debt: On debt restructuring, Ahmed said the federal government plans to use up to 65 percent of government revenues next year to service debt.
Fewer tax incentives: She said the government would also scale back on some tax incentives and expand the tax net to ramp up domestic revenue.
“Unfortunately, the cost of debt service is rising because of the rising interest rate globally, resulting in higher debt service costs. Our projection from the debt sustainability analysis is that Nigeria is able to cope with its debt service,” the minister said.
“We have been engaging financial institutions to look at the opportunity to restructure our debt to further stretch the debt service period to give us more fiscal relief. Those are some of the things we want to achieve in this meeting.
“Also, what we are doing is to ramp up domestic revenue mobilisation. There are so many different aspects that we are looking at, including cutting down on tax expenditure taxes, furniture, waivers, incentives that are being provided to encourage businesses.”
IMF advises poor countries: Earlier, Pierre-Olivier Gourinchas, IMF’s director of research department, advised low-income countries to progress toward debt restructuring to avert sovereign debt crises.
Gourinchas said many low-income countries are close to or are already in debt distress and should urgently consider improving their liquidity buffers, including by requesting access to precautionary instruments from the Fund.
