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IMF says Nigeria debt to GDP ratio already risky
The International Monetary Fund, IMF, has raised the alarm that ratio of Nigeria’s debt profile to GDP is already risky.
The IMF stated this on Wednesday at a press briefing on the Global Financial Stability Report. This is despite attempts by the Minister of Budget and National Planning, Udoma Udo Udoma, to diffuse tension brought about by the rising debt profile of the country.
The IMF, which said though the Debt to GDP ratio may still look low, insisted it is already too risky and cannot be guaranteed.
The ratio as at early 2018 stood at 21.1 percent early but has been projected to reach 25 percent at full year 2018.
The IMF also said the usage of the borrowed funds is important, saying they are better used to fund the productive sectors so as to have significant impact on the economy.
The Federal Government, however, has been spending much of the borrowed funds on infrastructures.
Read also: IMF reviews Nigeria’s GDP growth to 2.1% for the second time in 2019
Speaking at the press briefing, Tobias Adrian, Financial Counsellor & Director of Monetary & Capital Markets Development of IMF, said: “Nigeria’s borrowing to GDP is still low but we cannot guarantee the risk going forward given the global economic downturn. The prudent use of the money borrowed is significant to improving the economy.”
Adrian also spoke on the global economy saying that political and policy risks, such as an escalation of trade tensions or a no-deal Brexit, could affect market sentiment and lead to a spike in risk aversion.
According to him, amid rising downside risks to global growth, policymakers should aim to avoid a sharper economic slowdown, while keeping financial vulnerabilities in check.
“Policymakers should clearly communicate any reassessment of the monetary policy stance that reflects either changes in the economic outlook or risks surrounding the outlook. This will help avoid unnecessary swings in financial markets or unduly compressed market volatility”, he said.
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