Minister of Finance, Zainab Ahmed said that the Federal Government, FG, has commenced discussions with the World Bank and the International Monetary Fund on debt restructuring for the country.
She disclosed this in Washington at a media interview on the sidelines of the ongoing annual meetings of the World Bank and IMF, adding that debt restructuring is needed to tackle rising debt service costs of the FG.
She said: "It is a fact that Nigeria's debt has increased over the last three to four years and this increase in debt was occasioned by the different kinds of exogenous shocks that the country faced which is not unique to Nigeria.
The situation we have by the 2023 projection is that we will be needing to use about 65 per cent of our revenues to service debt.
"Unfortunately, the cost of debt service is rising because of the rising interest rate globally which is resulting also in higher debt service costs. But our projection from the debt sustainability analysis is that Nigeria is able to cope with its debt service in 2022 as well as in 2023.
"We have been engaging financial institutions to look at the opportunity to restructure our debt to further stretch the debt service period to give us more fiscal relief. Those are some of the things we want to achieve in this meeting."
While noting that while the interest rate hikes by central banks and strengthening of the dollar is necessary to curb rising inflation, Ahmed, however, noted that this will translate to increase debt service cost for the country.
She said: "On the borrowing side, it means that we are having to use more of our naira to pay debts that are dollar-denominated and as the dollar strengthens and the interest rate goes up globally, it affects us so we end up having to use more of our revenues to pay the debt.
"Our hope is that the tightening that the central banks across the world are undertaking will have the desired result because the cost is very stiff for us and it means we are having to use more of our local currency to service debt because of the exchange rate depreciation."
IMF Food Security Package
The Minister also disclosed that the FG will consider the newly created IMF Food Security Package for additional borrowing to tackle the severe impact of flooding on food production in the country.
She said: 'The last drawing we had from the IMF is the second round of Special Drawing Rights, SDR, that was provided for all the member countries of the IMF.
The IMF has recently offered a food security package which countries can draw and it is equivalent to about 50 per cent of their SDRs. We have not taken a decision to draw on that, we have to examine what are the requirements to see if it will be safe for us to draw because we don't want to be drawn into an IMF programme and as it is we are studying the terms and conditions.
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"If they work for us, we will now decide to take it because the funds can certainly be useful in terms of adding to our reserves and also in terms of helping us to cope with the challenges that the country is facing especially as the floods that have been happening right now in the country is going to cause more stress on our food system. We realize that the floods that are happening are currently destroying crops and therefore the harvest that is expected will be much less and it will mean that more of our people will struggle to be able to afford food."
GDP growth target
The Minister further stated that the FG remains optimistic about achieving 3.7 per cent Gross Domestic Product, GDP growth in 2022, notwithstanding the prevailing risks in the global and domestic economy.
"From the assessment, we have made of the global and domestic economy, with all things being equal we should be able to achieve that target. But then again, in the past three years we have seen all three major crises on the globe affecting us for all things being equal if the current risks that we have to stay even, we should be able to make that 3.7 per cent. Remember that Q2 2022 report was at 3.5 and we were told that is not very ambitious, but we're mindful of the risks that exist within the global ecosystem", she added.
