IMF exclusion of Nigeria from debt relief

The exclusion of Nigeria from the list of 28 countries granted some form of debt pardon by the Executive Board of the International Monetary Fund (IMF) has become worrisome to many, given the current precarious state of the Nigerian economy, particularly with respect to the ever-growing public debt service payment crisis. This IMF support programme structured for the rescue of poor and medium income countries battling with the economic effects of COVID-19 is being administered under the Catastrophe Containment and Relief Trust (CCRT). The key focus is for these countries to have grants for the payment of eligible debt service that fall due to the IMF such that funds hitherto programmed for debt servicing can be released to address other development challenges. The chosen countries, in the opinion of the IMF, are the poorest and most vulnerable in coping with the challenges of the COVID-19 pandemic on their economies. Indeed, the negative effects of the ravaging coronavirus or COVID-19 pandemic on the global economy has been widely acknowledged with most economies still grappling with the challenges posed by the pandemic. Nigeria is no exception in this regard and many have wondered whether Nigeria is not in an equally precarious situation as those 28 countries given the seeming freefall of major macroeconomic indicators to the chagrin of the average citizen.

Following from the initiative of Kristalina Georgieva, the managing director of the IMF to raise $1.4 billion in grants to assist poor countries devastated by the global pandemic, the major donors who have pledged contributions include the European Union, the United Kingdom, Japan, Germany, France, China, Singapore and a host of others. Accordingly, the first and second tranche of the fund were approved on April 13 and October 2, 2020 respectively for the 28 selected poor countries comprised of 22 in Africa as well as six in other regions of the world such as Benin, Burkina Faso, Burundi, Liberia, Niger, Afghanistan, Haiti, Nepal, Solomon Islands, Tajikistan and Yemen among others. In the opinion of IMF, Nigeria does not qualify to be so categorised to benefit from the CCRT. The approval of the third tranche of the CCRT from April 14, 2021 for debts falling due up to October 2021 were programmed for these same countries since, according to the directors of the IMF, the grants released under the first and second tranches were well utilised by these countries in their pursuit of appropriate macroeconomic policies that enhanced their debt sustainability ratings.

The key issue is why Nigeria has not benefited from this debt service support since it appears that, more than ever before in its history, it needs a lot of help in its debt sustainability efforts. The volume of Nigeria’s public debt, according to the National Bureau of Statistics, stands at about N32.92 trillion as at December 2020, comprised of N12.71 trillion (or 38.6%) external debt and N20.21 trillion (or 61.4%) domestic debt. The key problem with Nigeria’s debt situation is not the debt-to-GDP ratio which is estimated at less than 30% but the debt service payment-to-revenue ratio which is in the region of 60%. Indeed, Nigeria has a debt service payment problem and qualifies for the support that the IMF offers. Given that the IMF is reported to have resumed its surveillance and debt sustainability assessments, it needs to consider Nigeria as a possible beneficiary in its programmes along these lines. There may be the need to enlarge the coverage of the CCRT to include struggling middle income countries like Nigeria which have serious debt service and debt sustainability issues to contend with. Bringing a country such as Nigeria into the pool will also force it to put in place governance and transparency structures that will ensure that further unnecessary debts are not incurred and that the economy is saved from a seeming imminent collapse in the near term.