Nigeria Has Not Approached Us for Debt Restructuring, Says World Bank President

The President of the World Bank Group, Mr. David Malpass, on Thursday disclosed that Nigeria was yet to approach the bank for debt restructuring.
The World Bank president said this just as Minister of Finance Budget and National Planning, Mrs. Zainab Ahmed, on Thursday recanted, saying the country was not seeking debt restructuring, but was looking at options, including how to buy back some of its bonds.

Also on Thursday, the Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele expressed optimism that Nigeria’s Consumer Price Index (CPI), which is used to gauge inflation in the country would decelerate from its present rate of 20.52 per cent.

Malpass explained that the bank works closely with the International Monetary Fund (IMF) on issues that have to do with debt relief, under the G20 Common Framework process.
The statement by Malpass, who was responding to a THISDAY’s question during a media briefing at the ongoing IMF/ World Bank annual meetings in Washington D.C, was in contradiction with Wednesday’s statement by Ahmed that the country was seeking debt restructuring from the World Bank and the International Monetary Fund (IMF).

Ahmed had 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.”

Speaking during the media briefing, Malpass said: “With regard to debt restructuring, the World Bank works very closely with the IMF on debt situations, Nigeria has not asked for the Common Framework under the G20 process. That process has been slow, acting in Chad, Ethiopia, and Zambia and there are some signs of movement on Zambia, but it’s still challenging.
“So, Nigeria and Ghana, both did not ask for a common framework treatment. Kristalina Georgieva (IMF Managing Director) and I were talking yesterday with the group about if countries could have a situation where the common framework is paused or allowed the country to have a standstill on their debt.

“That would help the countries choose their path forward on debt restructuring and that would mean they would get a break on debt payments while they’re working out a restructuring agreement with the world. But Nigeria didn’t go, it hasn’t gone that route.”

The Common Framework deals with insolvency and protracted liquidity problems, along with the implementation of an IMF-supported reform program. G20 official creditors—both traditional “Paris Club” creditors, such as France and the United States, and new creditors, such as China and India, which had overtaken the Paris Club as lenders in the last decade — had agreed to coordinate to provide debt relief consistent with the debtor’s capacity to pay and maintain essential spending needs.

The Common Framework requires private creditors to participate on comparable terms to overcome collective action challenges and ensure fair burden sharing.
But so far, according to a report obtained on the IMF’s website, only three countries—Chad, Ethiopia, and Zambia—had made requests for debt relief under the Common Framework and this had experienced significant delays.

Nigeria’s debt stood at N41.60 trillion as of March this year.
Malpass also reiterated the need for Nigeria to gradually phase out petrol subsidy.
He said: “With regards to subsidies, to the extent that governments can have them be smaller meaning that if you’re putting a cap on gasoline prices, don’t make that a nominal cap in the local currency terms, but allow it to be reduced over time.
“So, the challenge for Nigeria is that the subsidies are so large that they undermine the revenues coming to the government from the state-owned oil company. Nigeria is actually in a concerning situation because the increase in the oil prices that occurred earlier this year actually ended up hurting the finances of Nigeria because of that large subsidy that’s provided.”

Furthermore, he restated that multiple exchange rates remains a challenge for Nigeria, saying it was hurting capital flows into the country as well as foreign direct investment. He called for ease in trade policies to avert Nigeria’s protectionist approach.
He added: “Some of the challenges in Nigeria that I’ve talked about and been involved with them for some time is the dual exchange rate or the multiple exchange rates that are used which makes it very hard to have capital flowing in an efficient way within the country.

“Also, the trade policies tend to be protected on the import side and restrictive on the export side. So we would work with the IMF on an assessment of the debt sustainability of Nigeria, but then it would also be up to Nigeria itself to interact with the various creditors, which include bondholders and includes official creditors that are engaged, in Nigeria.”

But in her contributions during a ‘Debate on the Global Economy,’ which featured the IMF Managing Director, Kristalina Georgieva; a renowned Egyptian-American economist and businessman, Mohamed Aly El-Erian; among others, Ahmed explained: “We are actually feeling the pressure, the market costs are too high for us to come out. We would explore the market in the near future and also because inflation is going up and is going to stay up for longer and also our debt service obligations in foreign currency are increasing.
“And what we have decided to do is not to wait for it to happen we have to start looking at how do we better manage our liabilities. For example, our domestic liabilities will be able to shift our loans from short-term to medium and longer-term tenors.
“We have to do the same for international borrowings as well, bilateral loans, and even some concessionary loans that the periods could be stretched to give us more fiscal room while we are working to increase revenue.

“To improve on our revenue to debt service, you still need to be able to renegotiate and stretch out repayment implications. So, we are not restructuring our loans, but we are looking at options of how we can stretch out including buying back some of our bonds when we have the resources to do that.”
In her remarks during the session, the IMF Managing Director said: “When you see the dark clouds on debt financing, don’t wait. Look at ways in which you can extend maturities, you can improve the matching of currency obligations with what you are earning yourself. In that sense, what Nigeria is doing in this current environment is exactly what you should be doing.”
Earlier, during a separate media briefing on the IMF’s ‘Global Policy Agenda,’ Georgieva noted the urgent need to support low-income countries who have huge debt burdens in order to avert an impending food crisis.

She said: “We also must support vulnerable emerging markets and developing countries. It is tough for everybody, but it is even tougher for countries that are now being hit by a stronger dollar, high borrowing costs, and capital outflows.

“A triple blow that is particularly heavy for countries that are under a high level of debt. So zeroing in on this for low-income countries where over 60 per cent are at or near debt distress is paramount. And we need stronger efforts to confront food insecurity.
“In all, 345 million people are acutely food insecure. What it means is that there are children and women and men are at risk of dying because of hunger.”

Emefiele Upbeat about Inflation Easing

Meanwhile, Emefiele has predicted that inflation rate in the country would decelerate.
The Divisional Chief Research Department, IMF, Daniel Leigh had said: “For Nigeria, in particular, we forecast inflation at about 19 per cent this year, but then some moderation next year down to 17 per cent, and part of that does reflect the monetary policy actions by Nigeria’s Central Bank as well as the decline that we expect in oil and food prices globally.”
Inflation in Nigeria is presently at 20.52 per cent. The CBN had last month raised the Monetary Policy Rate (MPR), otherwise known as interest rate, by 150 basis points, to 15.5 per cent from 14 per cent.

Speaking in an interview in Washington DC, the CBN governor who was reacting to the prediction by the IMF that Nigeria’s CPI would commence deceleration before the end of the year said: “I must say that even at these meetings, it is very clear that inflation risk is heavily elevated and for us in Nigeria, we believe that inflation at 20.5 per cent in the month of August was a very high one and that is why you have seen that monetary policy had taken some very stern positions to aggressively tighten not just through monetary policy rate but also by tightening, to see how we could take liquidity out of the vaults of the banks.”

He added: “We are delighted that people are beginning to see that these tightening effort would yield results. For us, 17 per cent looks good, but we believe that with what we are doing at the monetary policy, that our tightening effort would help to control demand and effectively lead to a further reduction below 17 per cent.”
Also reacting to the commendation by the IMF on the CBN’s monetary policy stance, Emefiele said: “It is really very heartwarming because they have seen that we are doing something that is in line with what the global central banks are doing in the area of tackling inflation.

“It is heartwarming and we can only continue to do what we are doing because it would give us the confidence to know that the action, we are taking is actually going to yield results and we can only continue to push in that direction.”

Also, in his reaction to the advice by the World Bank President for the CBN to unify exchange rates, he said: “At every point when we come into these meetings, they tell us to go back home and adopt home-grown policies.

“We cannot be accused of not doing what they want which is to take decisions on how to handle the exchange rate management. We are going to be looking at them and even be thinking of the right time to do what they are suggesting, otherwise if you do it exactly when they want, it may turn out to be very hurtful to the Nigerian economy.”

Obinna Chima, Eromosele Abiodun and Nume Ekeghe in Washington D.C

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