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Debt Management Office Fires Back at World Bank

Debt Management Office, DMO, has countered the World Bank Report that tagged Nigeria a high-debt risk nation.

DMO completely discarded the Report and exempted Nigeria from nine other countries globally selected on the list.

In a publication by everyevery.ng weeks ago, the global apex bank ranked Nigeria fifth among ten other nations as top world debtors.

The ratings were contained in the findings by International Development Association, IDA, Audited Financial Statement for the Fiscal Year 2021 (July 1, 2020-June 30, 2021) published on Monday, August 9, 2021.

According to a statement issued to journalists yesterday in Abuja, DMO mentioned that the World Bank’s report was an assessment of the performance of IDA and not the performance of IDA loans nor the debt repayment capacity of the beneficiaries.

Meanwhile, the debt management office outrightly termed IDA/World Bank records as false and misleading, stressing that it suggests an inadequate understanding of the structure of the Report.

The statement emphasized that the global apex bank, through IDA, gives concessional loans to poor and developing countries, assisting them to achieve improvements and growth in various areas.

These areas include job creation, poverty reduction, governance, the environment, climate adaptation and resilience, human capital, infrastructure, and debt transparency.

Debt Management Office

Debt Management Office
Debt Management Office Fires Back at World Bank 5

The debt management office noted the importance of reiterating the position of the World Bank, adding that some newspapers misrepresented its IDA report in Nigeria.

DMO stated that it was focused only on the composition of IDA’s loan portfolio and neglected to reference the debt sustainability of the top ten beneficiary countries.

As mentioned in the earlier publication, countries listed as the top five high-debt risk nations include India, Pakistan, Nigeria, Kenya, and Ghana, which the newspaper erroneously referred to as ‘high-debt risk nations’.

In parts, the DMO statement further mentioned that the IDA loans are typically for tenors of 30-40 years, grace period (moratorium on principal repayment) of 7-10 years and service fee of only 0.75 per cent.

The office also stated that the highly concessional nature of IDA loans, according to the DMO, satisfies the requirements of the provision of section 41 (1)(a) of the Fiscal Responsibility Act, 2007.

The section as mentioned above states that the government at all tiers shall only borrow on concessional terms with a low-interest rate and a reasonably long amortization period.

The statement revealed that the cost of IDA loans, which is the service fee of 0.75 per cent, is considerably low, thereby moderating the cost of debt service; the target is to reduce the financial weight on borrowers.

Also, the DMO wishes to state that Nigeria’s IDA’s debt stock as of June 30, 2021, was $11.7 billion.

It noted that IDA loans within the entire debt profile represents one of the most favourable borrowing options for countries like Nigeria and is also consistent with the Medium Term Debt Management Strategy of the Federal Government.

Debt Management Office

Here’s a recap of everyeveryng’s report on World Bank rating Nigeria number five amongst ten other countries with a high-debt risk:

Of countries ranked among the top 10 with high debt risk exposure globally, Nigeria is currently number 5, estimated at $11.7 billion.

Moreover, we gathered that World Bank would disburse $19.54 billion loans to Nigeria.

Already, the bank approved $1.46 billion loans but not yet signed, with a $6.61 billion signed loan commitment and $11.47 billion outstanding payment.

The rankings are among other top globally recognized debtors. In the order of appearance, India owes an overwhelming sum of $22 billion, followed by Bangladesh- $18.1 billion, Pakistan- $16.4 billion, Vietnam- $14.1 billion, then Nigeria.

Number 6 is Ethiopia with $11.2 billion, Kenya- $10.2 billion, Tanzania, $8.3 billion, Ghana, $5.6 billion, and Uganda, $4.4 billion.

World Bank

Debt Management Office

According to the World Bank, ‘the fiscal Year 2021, FY21 Financial Document, published by the International Development Association, IDA, back on June 30, the ten countries with the highest exposures accounted for 66% of IDA’s total debt exposure.’

IDA, World Bank financial institution that offers concessional loans and grants to the poorest developing countries, hinted that the Single Borrower Limit, SBL, for FY22, has been set at $45 billion, that’s 25 per cent of $180.9 billion of equity as of June 30, 2021, marginally higher than FY21.

To arrive at the total estimations by IDA, the bank revealed that monitoring these exposures relative to the SBL requires consideration of the repayment profiles of existing loans and disbursement profiles and projected new loans and guarantees.

IDA said it has “agreed to provide debt relief in return for future compensation from members for forgone reflows, ensuring that the process does not reduce IDA’s financial capacity.

“For a borrower to be eligible for debt relief on its loans with IDA, it is required to maintain macroeconomic stability, carry out key structural and social reforms, and maintain all loans in accrual status”.

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