…canvasses gradual subsidy removal
The Nigerian government is yet to approach the World Bank and International Monetary Fund (IMF) for restructuring of her debts, President of the World Bank Group, David Malpass, has said. The global bank’s boss also expressed concerns about Nigeria’s fuel subsidy regime, advising the Federal Government to begin a gradual removal of the subsidy, which has brought her economy to its knees. Nigeria could spend up to N6.72 trillion ($16.2 billion) next year if it keeps a fuel subsidy, a nearly 70 per cent jump from this year’s budget of N1.4trillion.
Nigeria’s Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, had last Wednesday at the ongoing Annual Meetings of the World Bank/IMF meetings in Washington D.C., hinted that the country was considering restructuring her debt and extending the repayment period of its creditobligationsandhadappointed consultants to advise the government as it faces a rising debt-service burden. But in response to a question about Nigeria’s debt, Malpass, whospokeatapress briefing in Washington D.C., said Nigeria has not had any discussion on the restructuring of her debts, which amounted to N42.8 trillion as at June 2022. “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 theG20process.
Thatprocess has been slow in Chad, Ethiopia, andZambiaandthereare 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 and I were talking yesterday (Wednesday) with the group about if countries could have a situation where the common framework 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 World Bank boss explained.
With regard to subsidies, Malpass also advised that the Nigerian government begin a gradual process of subsidy withdrawal. He said: “On subsidy, 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 stateownedoilcompany. 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.” Besides, he noted that the multiple exchange rates regime available in Nigeria was reducing foreign direct investmentandcalledforease intradepoliciestoavertNigeria’s protectionist approach.
“Some of the challenges in Nigeria that I’ve talked about and been involved with them for some time is the dual exchange rates or the multiple exchange rates that are used, which make it veryhardtohavecapitalflowing in an efficient way within the country,” the World Bank chief said. “Also, the trade policies tend to be protected on the import side andrestrictive 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 tointeractwiththevarious creditors, which include bondholders and official creditors that are engaged in Nigeria,” he added.
