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Published On: Wed, Apr 18th, 2018

Work towards reducing your debt servicing ratio, IMF cautions Nigeria


The IMF yesterday advised Nigeria to enthrone higher fiscal discipline to enable her control her rising debt. The Bretton woods which discussed issues around Fiscal Monitor cautioned low imcome countries that are grappling with rising debt, especially the emerging markets which borrowings appear to rising higher by the day to exercise caution.

Catherine Pattillo of the IMF Fiscal Affairs Department

Speaking with journalists at the ongoing Spring meetings in Washington D.C USA, Assistant Director, Fiscal Affairs Department of the International Monetary Fund, Catherine Pattillo stated that Nigeria already spends about 63 per cent of its revenues to service debt.
She said that countries with high debt profile and which cannot service their debt adequately may find it difficult to borrow as creditors could become wary.
However, she aplauded recent tax reforms by Nigeria which is meant to help expand revenue and enable the federal government increase spending on infrastructure.
According to her, Nigeria is already implementing far reaching measures including expanding her tax base, strengthening tax incentives among other measures to mobilise additional revenue for growth.
”Building revenue is key because high debt serving eats upyour revenue”, she said.
The IMF also noted that a number of emerging markets economies have taken advatage of an extended period of benign external financial conditions to improve their fundamentals.
But the institution also warned that these countries could be vulnerable to a sudden tightening of global financial conditions or spillovers from monetary policy normalization in advanced economies, resulting in an increase in risk aversion and capital flow reversals.
”The severity of such potential shocks will differ across countries, depending on economic fundamentals and policy responses to those shocks,” said IMF.
Nigeria’s debt challenge is coming at a time when the domestic and international borrowing spree, has ramped up by over N10 trillion since 29 May 2015. The debt profile is now about N22 trillion or $73 billion.

Dr. Alex Otti,

The increase reveals an increase of over 80 per cent in less than three years. This is alarmingly significant because by May 29, 2015, the nation’s debt profile stood at N12.06 trillion, while between 2015 and 2017, it went up to N22trillion.
”Strictly speaking, I am not against borrowing. But I want to know what you are borrowing for. I am worried because I understand at the moment that we spend huge percent of our revenue in servicing debts. That is a huge number. I think is time the government thinks of investment rather than borrowing. What can we do to encourage investment, both foreign and local? Somebody could rent a shop and lock up money there. He could have done something better with it? Even if it came into the banking system, it could have created jobs. If it is possible to encourage such monies to come into the system, then, the government could use its own ways and means. Somebody argued that we still have room to borrow, but you need to look beyond your borrowing and focus on your ability to pay back.”, and economist and Govership asparant in Abia State had said.


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