Still struggling to deal with the impact of the coronavirus on their economies, the International Monetary Fund (IMF), has said Nigeria and other countries in the sub-Saharan African (SSA) region would need additional financing needs of over $110 billion.
Of this $110 billion and approved loans, the IMF insisted that the countries still have $44 billion financing gap to fill. Noting that many citizens are informal workers and typically have few savings and limited access to finance, the IMF ruled out further considerations of lockdown to check the pandemic, saying that effort complicates the authorities’ hard work to maintain an effective lockdown.
The recent Senate’s approval of President Muhammadu Buhari’s $5.513 billion loan request bumped Nigeria’s external debt profile to $33.18 billion, representing over 90 per cent of its foreign reserves.
According to the Organised Private Sector (OPS), rather than exploring fiscal reforms that would aid productivity, diversification and stimulate private sector’s contribution to the economy, the government continues to explore the easy approach to financing its budget.
Beyond fiscal reforms, the private sector argued that tenor of any loan repayment by any administration should be limited within the life of that administration to check debt accumulation for future generation.
According to the Joint World Bank-IMF Debt Sustainability Framework for Low-Income Countries released earlier, a country’s debt service to revenue threshold should not exceed 23%. With debts remaining unsustainable, the government might have no choice than to increase its revenues or face further spending cuts.
In its latest regional outlook tagged, “Sub-Saharan Africa: A Cautious Reopening,” the IMF commended fiscal efforts embarked by the countries in the region, but noted that they should gradually shift from broad fiscal support to more affordable, targeted policies; concentrating in particular on the poorest households and those sectors hit hardest by the crisis.
Notwithstanding the home-grown solutions deployed by many countries, the IMF expressed worry that around 90 per cent of non-agricultural employment is in the informal sector, where participants are usually not covered by the social safety net.
Urging other institutions to assist the region, the IMF said: “This crisis is unprecedented. Our members need us now more than ever. And our efforts today will have significant consequences down the road, not only in helping our members offset the immediate tragedy of the crisis, but also in ensuring that peoples’ lives and livelihoods are not destroyed forever.
“In response, many authorities have done what they can to temporarily expand their safety nets; using home-grown, often innovative approaches to ensure that transfers reach as much of their population as possible. But again, resources are limited, and these efforts cannot hope to offset the full impact of this crisis.”