The World Bank has disclosed that Nigeria could save about $432.6M from May 2020 to December 2021 through the debt service suspension initiative. It disclosed this in a brief on COVID-19: Debt Service Suspension Initiative updated by the bank on its website.
Under the DSSI, official creditors commit to suspend payments on all principal and interest coming in within a stipulated period of time. The World Bank, in its brief, provided an estimate of what different countries, including Nigeria, could save if creditors suspended payments on all principal and interests within a period of 20 months.
However, Nigeria is not a beneficiary of this initiative, which could add 0.1 per cent to Nigeria’s Gross Domestic Product, according to the brief. Despite being one of the largest World Bank borrowers, Nigeria is not covered by the Joint Bank-Fund Debt Sustainability Framework for Low-Income Countries.
In a separate document published in April this year by the World Bank – the Debt Report 2021 Edition II – the bank provided a justification for countries that were not yet beneficiaries of the DSSI. The report said that although some countries were eligible for the DSSI, they had chosen not to participate for a number of reasons.
Some of the reasons included conveying wrong signals to bondholders and other private creditors, among others. The report said, “Some DSSI-eligible countries have thus far elected not to participate. Currently, 27 DSSI-eligible countries, 37 per cent of eligible countries, are not participating in the initiative for a variety of reasons.
“Some fear participation may convey the wrong signal to bondholders and other private creditors while others note the amount of eligible bilateral debt service was negligible, and savings do not justify the administrative expenses incurred by deferral. Because the DSSI only defers payment to a later date, some policymakers worry longer term debt sustainability may be sacrificed for short-term financial flexibility.” It further disclosed that Nigeria owes 41 per cent of its external debt stock to private creditors, particularly bondholders.