World Bank Knocks Nigeria, Others for Rising Debts
While releasing ‘Africa’s Pulse’, a biannual analysis of African Economies in Washington on Wednesday, the World Bank’s Chief Economist Africa, Albert Zeufack; Lead Economist, Africa, Punam Chuhan-Pole; and Research Manager, Michael Toman, said the continent has been showing positive growth but warned that its debt was increasing in at a very high rate.
The World Bank team spoke to journalists across African countries through video conference. According to the team, the rising debt is led by some Oil exporting nations, which have seen more than 50 per cent rise in debts recently. Zeufack stated that the problem of Africa’s debt was not concessional loans secured from the World Bank, but commercial loans that countries in the region had gone ahead to secure.
According to him, such commercial loans come with exchange rate risks, global financial condition risks and commodity price risks. Speaking specifically on Nigeria, Chuhan-Pole said although the country’s debt remained low going by the debt to Gross Domestic Product ratio, interest payment has been high. “Interest payment as a share of Government revenue is quite high. It raises issue of sustainability,” she stated.
Generally on the continent, she said, “The rate at which countries are accumulating debts is very high. Our countries need to pay attention to the rate at which debts are rising.” The Debt Management Office recently put the country’s debt profile at N21.73Tn as of December 31, 2017, up from N12.2Tn as of June 30, 2015. Our correspondent reported that the Federal Government had spent a total of N3.72Tn to service local debt in the past three years.
The Federal Government spent a total of N1.48Tn on actual debt servicing in 2017. With a total of N1.23Tn and N1.02Tn spent in 2016 and 2015, respectively, on domestic debt servicing, these add to a total of N3.72Tn spent on domestic debt servicing in the last three years. According to the World Bank, Sub-Saharan Africa’s growth is projected to reach 3.1 per cent in 2018, and to average 3.6 per cent in 2019 to 2020.
The growth forecasts are premised on expectations that Oil and metals prices will remain stable and that Governments in the region will implement reforms to address macroeconomic imbalances and boost investment. Zeufack said, “Growth has rebounded in Sub-Saharan Africa, but not fast enough. We are still far from pre-crisis growth levels.
“African Governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth.” The report stated that it was necessary for African countries to embrace new technologies in order to address access to electricity, which is needed for production on the continent.
The World Bank said a combination of solutions, including national grid, mini-grid and off-grid technologies, were needed to address both availability and affordability of electricity in the region.
Welcoming Nigerian participants to the conference, the Acting Head of the World Bank Office in Nigeria, Mr. Khairy Al-Jamal, said the global financial institution would continue to work with the country and other development partners on a range of critical reforms for restoring macroeconomic resilience to further strengthen economic growth.
He noted, “The World Bank is committed, through a varied range of the Nigeria portfolio, to support the Federal Government with programmes aimed at improving infrastructure, both physical and economic; improving human capital; and enacting social policies that will increase opportunities for the poor and the vulnerable.
“Particularly, through a Country Partnership Framework, we continue to support the Government in implementing reforms to tackle macroeconomic imbalances and boost investment in agriculture, power, water, transport, education and health sectors.
“Nigeria continues to take strides in economic and regulatory reforms; for instance, the implementation of the Economic Growth and Recovery Plan. The report recognises Nigeria as one of the few Sub-Saharan countries, which are undertaking significant regulatory reforms to lower barriers in mini-grid investment.”
Al-Jamal said the Bank would continue to work with the Nigerian Government to enable it to collect sufficient revenue, spend its resources well, adopt the policies that would enable private sector investments and improve governance overall.