Director-General of the DMO Patience Oniha
DMO faults IMF over report on Nigeria’s debt servicing capability
Debt Management Office (DMO) has faulted the projection of the International Monetary Fund (IMF) that Nigeria might spend over 92 per cent of its revenue on debt servicing in 2022.
The IMF, which made the projection in its 2021 Article, published, last Wednesday, also estimated the 2021 debt servicing-to-revenue ratio at 85.5 per cent.
The IMF report pointed out that Nigeria’s gross financing needs would worsen under stress scenarios, signaling risks to debt sustainability.
“Gross financing needs would reach 13 percent of GDP under shocks to the real interest rate and almost 14.7 percent of GDP under the combined macro-fiscal shock, while under the other shocks, maintaining the level below 12 percent of GDP over the medium-term.
“The FG interest payments-to-revenue ratio is highly vulnerable to shocks. Higher interest rates will increase Nigeria’s vulnerabilities by placing a principal risk on debt service capacity. In particular, a real interest rate shock would increase the FG interest-to-revenue ratio to about 348 percent by 2026. A standardized combined macro-fiscal shock would increase the ratio to 398 percent. Other shocks to real GDP growth, primary balance and the exchange rate would increase the ratio to between 247 and 273 percent by 2026,” the report read.
It, however, estimated the debt-servicing-to-consolidated revenue (total revenues of the government and its agencies) for 2021 and 2022 at 29 per cent and 32.8 per cent, respectively.
The DMO, in a statement by its Director-General, Mrs Patience Oniha, faulted the IMF report and a similar one by foremost Pan-African Credit Rating Agency, Agusto & Co.
She said that both reports failed to consider the challenges experienced by Nigeria in recent times.
“There were challenges such as two recessions, sharp drop in revenues, and security challenges.
“Even more, the analyses do not acknowledge the improvements in infrastructure; which have been achieved through borrowing, as well as, the strong measures by the Government to grow revenues,” she said.
Oniha reiterated the fact that the Federal Government was already implementing policies; towards increasing revenues and developing infrastructure through Public Private Partnership arrangements, both of which will improve debt sustainability.
She noted that the Federal Government had active and regular engagements with the IMF on borrowing and debt management.
The DMO had, however, explained that the country’s total debt of $92.9 billion, and debt to Gross Domestic Product (GDP) ratio of 35.51 per cent were within sustainable limits.
