IMF Assesses Nigeria’s Debt as Moderate Amid Economic Challenges

The IMF claims Nigeria’s debt is moderate and not high risk, urging targeted interventions for economic stability amidst rising public debt. The country reached a record 6,003 megawatts in power generation while focusing on enhancing domestic revenue and efficiency in economic reforms.

The International Monetary Fund (IMF) reassured Nigerians regarding the country’s debt situation, stating that it is moderate and poses no high risk. Gita Gopinath, the IMF’s First Deputy Managing Director, made these comments during an interview in Lagos, where she also highlighted the significant economic challenges Nigeria is facing and the government’s need for targeted social interventions to alleviate burdens on citizens.

In a related development, Nigeria achieved a record 6,003 megawatts in peak power generation, the highest ever recorded, according to government announcements. Additionally, Nigeria’s total public debt increased to N142.3 trillion as of September 30, 2024, primarily due to the devaluation of the exchange rate.

The Debt Management Office reported minor increases in external debt from $42.90 billion in June to $43.03 billion in September. Despite the rising debt levels, a moderate debt indicates sustainability, allowing the country some fiscal flexibility without jeopardizing financial obligations. Gopinath affirmed that Nigeria’s risk of sovereign stress is moderate and reiterated the importance of maintaining prudent fiscal policies.

When questioned about Nigeria’s capacity to incur further debt, Gopinath cautioned against excessive borrowing, emphasizing the need to maintain manageable levels. Given the high proportion of revenues allocated to interest payments, it is crucial for Nigeria to enhance domestic revenue mobilization to fund social support and development initiatives. Gopinath suggested that reducing exemptions and improving tax administration could yield considerable revenue increases.

She also highlighted that the Central Bank of Nigeria must maintain a tight monetary policy to stabilize the naira and control inflation. Gopinath indicated that continuous efforts in fiscal policy alignment are necessary to prevent adverse impacts on the currency. Achieving balance in fiscal and monetary policy is crucial for maintaining investor confidence.

Discussions with Finance Minister Mr. Wale Edun focused on reforms aimed at improving the investment climate and enhancing social support programs. The government is transitioning to a biometric system to increase transparency in social investment initiatives while also improving tax reforms and digital resource mobilization.

With progressing crude oil production from 1.2 million to 1.8 million barrels per day, Nigeria’s revenue prospects appear promising. Additionally, the finance ministry emphasized the necessity for private sector investments and renewable energy policy advancements to ensure sustainable economic growth.

The recent peak power generation milestone, acknowledged by the government, represents a historic achievement, with aspirations for ongoing improvements in meeting energy demands. Increases reflect the government’s commitment to the sector, which has seen significant reforms aimed at enhancing efficiency.

The government noted that restructuring tariffs is crucial for unlocking the sector’s potential and fostering private investments through improved financial liquidity. The ongoing rehabilitation of infrastructure and adoption of innovative technologies are expected to sustain momentum moving forward.

Efforts are required to eliminate the tariff deficits and legacy debts to the Generation Companies for continued progress. With preparations underway for the National Council on Power (NACOP) conference, the Finance Minister stressed the importance of stakeholder cooperation to realize a stable, reliable, and efficient power sector in Nigeria.

The IMF has conveyed that Nigeria’s current debt level is moderate and not a high risk, urging the government to adopt targeted interventions to address economic challenges. The country has made significant strides in power generation, achieving a record output while acknowledging the necessity of fiscal responsibility and improving domestic revenue. Continuous reforms in tax and energy policies will be essential for Nigeria’s economic stability and growth, highlighting the importance of government and stakeholder collaboration in realizing these objectives.

Original Source: www.arise.tv