Nigeria may be warming up for a debt repayment relief as there are strong indications that the World Bank Group and the International Monetary Fund (IMF) would recommend to the G20, an extension of the Debt Service Suspension Initiative (DSSI) by low-income countries until the end of 2021.
Nigeria is owing the two institutions about USD14 billion while the 2021 budget has projected to spend as much as N3.12 trillion in debt servicing during the fiscal year.
The possible relief is contained in a paper presented by staff of the World Bank/ IMF at the backdrop of its 2021 virtual Spring Meetings which commenced yesterday. The recommendation which will further provide relief from debt service under the COVID-19 pandemic initiatives, requires the approval of the Executive Boards of the organizations to become their official positions. According to the paper, the recommendation has become necessary as most debtor-countries have been found to be struggling with the negative effects of the COVID-19 pandemic on their economies. “As COVID-19 has continued to spread worldwide and the economic recovery remains exceptionally uncertain, a further extension of the DSSI up to end-2021 would help eligible countries meet their elevated financing needs and fight poverty. “Worldwide cases have multiplied, and new, more contagious viral strains have emerged. At the same time, developing countries and vulnerable populations risk being left behind in the global vaccine rollout. Liquidity needs are expected to remain high in 2021 and debt sustainability outlooks have deteriorated further. “The economic outlook remains exceptionally uncertain at a time when many DSSI-eligible countries already have protracted breaches of DSA debt indicators. The World Bank estimates that to attain levels of vaccination coverage to interrupt virus transmission, Africa would need about US$12 billion for vaccines and incremental costs for deployment, almost the same amount of official debt service deferred by current DSSI participant,” the staff said in the paper. According to the paper, “In some IDA countries, the interest burden already exceeded pre-HIPC levels—and debt service burdens are highest in Sub-Saharan Africa. Overall external public and publicly guaranteed (PPG) debt-service-to-revenue ratios for IDA countries increased from 8.2 percent to an estimated 11.8 percent between 2017 and 2019. The situation deteriorated during 2020, with 54 percent of IDA countries in or at high risk of debt distress.” Nigeria’s ratio is said to be significantly above 70 percent.