The International Monetary Fund’s Mission Chief and Senior Resident Representative for Nigeria, Jesmin Rahman, has projected that Nigeria’s debt-to-gross Domestic Product ratio may rise to 36.5 per cent this year, up from the 29 per cent it was in 2019.
World Bank’s Senior Financial Sector Specialist, Ahmed Rostom, said about 42 per cent of staff working in the Nigerian hospitality and service industry before March have lost their jobs due to the effects of the COVID-19 pandemic on the economy.
The IMF chief described the spike in government borrowing in the short-term as worrisome and should be closely monitored.
She, however, said as long as debt-to-GDP ratio stays below 45 per cent, it would still, be sustainable.
Rahman, during an interview hosted by Citibank Nigeria in collaboration with the American Business Council, yesterday, said: “Nigeria’s public debt was at 29 per cent of GDP in 2019 in our definition of all known liabilities like the Central Bank of Nigeria financing of the budget, financing of the power sector, Asset Management Corporation of Nigeria debt and everything came to 29 per cent of GDP.
“We project this to increase to 36.5 per cent this year, which is a jump and then stay around 38 per cent of GDP in the medium term.
“However, we think the debt level is sustainable for a few reasons. Firstly, the debt levels have increased but the debt level itself is below the average for emerging and developing countries, which is around 50 per cent of GDP. And the reason is that debt levels do not worsen significantly when we put it under various stress scenarios as it stays below 45 per cent.
“Domestic financial conditions are very favourable so all in all, if you take into account all these, we would say the public debt is sustainable.
“It requires close watching because it has gone up quickly and this year it is going to go up even more. Perhaps more importantly, the very limited debt-servicing capacity is driven by low revenue. Debt servicing capacity is severely constrained and that requires a close watch.”
Rahman noted that the recent steps being taken to unify the forex windows were commendable.
“The authorities have started to move towards that direction and we welcome this move and having a clearer strategy on how to ensure FX availability to businesses and communicating that strategy to everyone is important,” she stated.
