Nigeria fails World Bank rating on debt disclosure

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The World Bank said on Monday that Nigeria had failed to meet full disclosure requirements on debt reporting for three consecutive years, adding an ugly remark to the country’s nasty debt history.

Nigeria’s public debt stock has increased significantly over the past five years as the country battles economic headwinds emanating from covid-19 and poor fiscal policies. Nigeria’s total public debt stock stood at N41.6 trillion or $100.07 billion as of March 31, 2022, according to data from the Debt Management Office (DMO).

The report says the World Bank has, over the past three years, monitored Nigeria’s transparency in its debt reporting practices and found that it was not adhering to the “full disclosure” policy it had established. for countries of the International Development Association (IDA).

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“Global studies indicate that debt transparency directly contributes to higher credit ratings, lower borrowing costs and foreign direct investment (FDI) inflows. Therefore, the debt management office has taken a strategic stance to focus on debt transparency efforts and has taken several steps to improve public debt reporting and disclosure,” he said. .

The Washington-based financial body said Nigeria had not published annual borrowing plans (ABPs), adding that secured and unsecured debts were not reported and information on recently contracted loans was not reported. were also not provided.

The World Bank said these are indicators that Nigeria has failed to meet the “full disclosure” rating for each of the nine categories of the debt transparency heatmap.

According to the financial organization, the transparency of the Heat Map debt implies the accessibility of the data; instrument coverage, sector coverage, information on borrowings, periodicity, time interval, debt management strategy, annual borrowing plan and other debt statistics/contingent liabilities (CL).

Nigeria borrowed internally to fill its budget gaps. Domestic borrowing accounts for more than 70% of the country’s total debt, including central bank ways and means advances which exceeded N19 trillion, according to DMO data.

Ways and Means Advances is a loan facility through which the Central Bank of Nigeria finances government budget deficits.

As concerns grow over Nigeria’s rising public debt, servicing of which currently absorbs around 95% of the country’s revenue, Ways and Means Advances have become another cause for concern.

The CBN has admitted that the federal government’s borrowing from it through the Ways and Means advances could have adverse effects on the bank’s monetary policy to the detriment of domestic prices and exchange rates.

“The direct consequence of central bank financing of deficits are distortions or increases in the monetary base leading to negative effects on domestic prices and exchange rates, i.e. macroeconomic instability due to the ‘excess cash that’s been pumped into the economy,’ he said on his website.

Last November, the World Bank also warned the Nigerian government against borrowing from the CBN to fund budget deficits, saying it puts fiscal pressure on the country’s spending. In addition, borrowing from the CBN through Ways and Means Advances will increase the cost of debt in Nigeria, the World Bank said.

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