IMF wants Nigerian govt to shut down companies in debt

The International Monetary Fund (IMF) has urged the Nigerian government and other nations to liquidate companies that are too weak to survive the debt they piled up due to COVID-19 outbreak.

IMF said government’s financial support should be more focused as central banks across the world begin to withdraw their fiscal support meant to cushion the negative effect of COVID-19 on business operations.

In a statement received by Ripples Nigeria on Wednesday, the global creditor said debt owed by Corporate organisations across the world rose to $83 trillion in 2020, recording $8.9 trillion increase in same year.

The $83 trillion corporate debt accounts for 98% of the world’s gross domestic product at the end of COVID-19 breakout year, while it was gathered that China and advanced economies held 90 percent of the $8.9 trillion increase.

Read also: Naira suffers heavy falls after IMF calls for Nigeria to abandon exchange rate

This debt servicing costs are set to increase with central banks planning to raise rates to check inflation – a move that could expose the vulnerabilities of the corporations.

In order to reduce the impact the corporate debt will have on economy recovery, IMF advised that financial support should be made available for companies that can survive and prepare to restructure.

“Corporate vulnerabilities will be exposed as governments scale back the fiscal support that they extended to stricken firms at the height of the crisis.

“Governments face difficult decisions as they manage these risks to the economic recovery. They may need to continue providing financial support to firms that can recover (but cannot raise the private financing to do so) while withdrawing support from firms that are so badly scarred that they should be restructured or liquidated.” The statement reads.

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