High Debt Risk: World Bank Report Was Misrepresented – DMO

The Debt Management Office (DMO) has responded to the report by the World Bank, noting that Nigeria is not a high debt risk country.

A World Bank report released on Monday on the financial statement for the International Development Association (IDA), stated that Nigeria had accrued a debt of $11.7 billion, making it the fifth high-risk debtor to the institution.

The DMO had said that the report had been “misrepresented”, as it only focused on IDA’s loan composition and not the “debt sustainability” of the beneficiaries of the loans.

It said, “The World Bank’s report was an assessment of the performance of IDA and not the performance of the IDA loans nor the debt repayment capacity of the beneficiaries of IDA loans.

“By way of explanation, the World Bank, through IDA, gives concessional loans to poor and developing countries to help them achieve improvements in growth, job creation, poverty reduction, governance, the environment, climate adaptation and resilience, human capital, infrastructure, and debt transparency. Nigeria is a beneficiary of IDA loans.

“It is important to re-emphasize that the World Bank’s report, which was misrepresented, focused only on the composition of IDA’s Loan Portfolio and did not make any reference to the debt sustainability of the top ten (10) beneficiary countries of IDA loans, such as India, Pakistan, Nigeria, Kenya and Ghana.

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“IDA loans are typically for tenors of 30 – 40 years, grace period (moratorium on principal repayment) of 7 – 10 years and service fee of only 0.75%.

“The highly concessional nature of IDA loans satisfies the requirements of the provision of Section 41(1)(a) of the Fiscal Responsibility Act, 2007, which states that government at all tiers shall only borrow on concessional terms with low interest rate and with a reasonably long amortization period. The cost of IDA loans, which is the service fee of 0.75%, is considerably low, thereby moderating the cost of debt service.

“The DMO wishes to state that Nigeria’s IDA’s Debt Stock as at June 30, 2021, was $11.7 billion. IDA loans represent one of the most favourable borrowing options for countries like Nigeria and are also consistent with the Medium Term Debt Management Strategy of the Federal Government.”