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PEOPLES DAILY, WEDNESDAY JANUARY 18, 2023 BU$IN€SS
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By Abubakar Yunus Abuja
The International Monetary Fund (IMF) has stated that about 15% of low-income countries are already in debt distress.
In a new report titled ‘Confronting Fragmentation Where It Matters Most: Trade, Debt, and Climate Action’, the IMF said an additional 45% of the population is further at high risk of debt distress.
It stated that debt is a challenge that many countries face, and fragmentation will make it harder to resolve sovereign debt crises, especially if key official creditors are divided along geopolitical lines.
IMF noted that about 25% are at high risk and facing defaultlike borrowing spreads among emerging markets.
Resolving the debt challenge: IMF noted that there are signs of progress on the Group of Twenty’s Common Framework for debt treatment. While Chad recently reached an agreement with its official and private creditors, Zambia is progressing toward a debt restructuring. Similarly, Ghana just became the fourth country to seek treatment under the Common Framework, sending a signal that it is seen as an important pathway for debt resolution.
According to the IMF, countries seeking debt restructuring under the Framework will need greater certainty on processes and standards, as well as shorter and more predictable timelines.
For countries not covered by the framework, however, it suggests that there is a need to improve their processes. Part of the report said:
“To support these improvements, the IMF, World Bank and Indian G20 presidency are working with borrowers and public and private creditors to quickly establish a global sovereign debt roundtable, where we can discuss current shortcomings and make progress to address them.
Climate action: IMF pointed out that the agreement at COP27 to set up a loss and damage fund for the most vulnerable countries shows that progress is possible with enough political will.
Hence, it suggests further pragmatic steps to cut emissions and curb fossil fuels.
To the fund, an international carbon price floor among major emitters could be a potential game changer to focus on carbon pricing or equivalent measures in an equitable process that would complement and reinforce the Paris Agreement.
It also suggests stepping up climate finance to help vulnerable countries adapt as well as better data around climate projects.
IMF projects that trade growth is expected to decline in 2023, making it more critical to roll back the distortionary subsidies and trade restrictions imposed in recent years.
Meanwhile, it noted that strengthening the role of trade in the global economy – which is key in an economy beset with low growth and high inflation – begins with vigorous World Trade Organization reform and by concluding WTO-based market-opening agreements.
It suggests that plurilateral agreements, among subsets of WTO members, can offer a path forward, adding that there is a need to be pragmatic about strengthening supply chains.
IMF also suggests that countries should carefully weigh the costs, at home and abroad, of national security measures on trade or investment, adding that better policies at home, from improving social safety nets to investing in job training to increasing worker mobility across industries, regions, and occupation would ensure that trade works for all.
Why Nigeria’s ICT industry is attractive to investors —NITDA DG
By Abubakar Yunus Abuja
The Director-General of the National Information Technology Development Agency (NITDA), Kashifu Inuwa, has listed factors that make Nigeria’s ICT industry attractive to investors.
According to him, these factors include Nigeria’s large population size and its emerging economic status.
Inuwa, who stated this while speaking at a meeting with the Chief Executive of Startup Lions, Ludwig von Bayern, said the government has also put many interventions in place in terms of ‘policies, laws, and infrastructure to help businesses to grow.’
While calling on German investors to come and invest in Nigeria’s tech ecosystem, the NITDA DG said investing in the tech industry comes with many rewards for investors.
Comparative advantages: Highlighting the advantages the country has over other African countries, Inuwa said:
“The future of Nigeria is much more promising than today due to the four comparative advantages the nation has over other countries of the world. Our large population with an emerging economic status position put us at a pole length as a suitable investment destination in Africa.
He further said that Nigeria’s economy was emerging because it attracts 30% of the continent’s Foreign Direct Investment (FDI), with more than $ 2 billion in the past year.
According to the DG, the level of support the government now gives to the tech ecosystem is unparalleled in the history of the country, and this provides opportunities for entrepreneurs to quickly and conveniently start and grow businesses. He said:
Inuwa recalled the passage of the Nigerian Startup Act, the Executive Order on Ease of Doing Business, including other incentives like Visa on Arrival and Business Incorporation under 24 hours, adding that these would also help investors in the industry to scale.
“All these were aimed at transforming the digital ecosystem of the country. Nigeria has a youthful and talented population that is unique. Nigeria has a high potential for social and economic impacts and investing in the country would help the country solve its myriad of challenges,” he said.
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President Buhari set to exceed Nigeria’s 40% debt -GDP threshold
By Abubakar Yunus Abuja
President Muhammadu Buhari may limit Nigeria’s next government from borrowing any further if he succeeds in convincing the Nigerian Senate to convert an unpaid N22.7 trillion ($50 billion) overdraft from the Central Bank of Nigeria (CBN) to public debt.
President Buhari’s push is despite concerns surrounding the legality of the borrowing.
Peoples Daily gathered that the president asked the Senate to approve his plan to convert 22.7 trillion naira into bonds that will be repayable over decades. The move would immediately boost the country’s official debt load by more than half, propelling Nigeria’s debt-toGDP ratio toward the 40% limit set by the administration. Such borrowing has exploded 30-fold under President Buhari. If the Senate accedes to Buhari’s proposal, it would add about 50% to the official public debt.
With such a scenario, and if the federal government maintains its 40 debt to GDP ratio, any incoming government would be left with no choice but to generate all of its income internally, which would imply increasing taxes. Commenting on the likely scenario, Moses Igbrude, the national coordinatorelect of the Independent Shareholders Association of Nigeria, said the Buhari administration is setting a debt trap for the incoming administration.
Igbrude said if well-managed, Nigeria should have no problem with debt, if the debt were used for production, but lamented that the country is being enmeshed in debt servicing with no way out because the federal government has been borrowing for consumption over the years, which is not sustainable.
However, the CEO of Anthill Concepts Limited, Dr Emeka Okengwu, said the 40% limit set by the federal government is not sacrosanct.
He said any other government can set a new limit for borrowing. He added that converting the Ways and Means withdrawal from the CBN to long-term debt would be an assurance from the federal government of its commitment to pay the debt.
Frank Mbata, an economist with Cashlinks Trust, said Nigeria’s debt stock is becoming grossly unsustainable. He noted that if the country cannot service an N42 trillion debt, it would be much more difficult to service an N77 trillion debt. He lamented that the current generation of leaders is piling up a huge liability for the unborn generation.
Mbata stated that Nigeria will have to take the hard decision of cutting the cost of running the government. He particularly cited the cost of running a bloated civil service, as well as the ‘jumbo cost’ of maintaining the National Assembly.
Ghana extends deadline for domestic debt swap programme to Jan 31
Abubakar Yunus Abuja
The Ghanaian government has extended the deadline for its domestic debt exchange programme to January 31, 2023.
Ken Ofori-Atta, Ghana’s finance minister, disclosed this in a Twitter post recently.
This would be the third time the deadline is being extended.
On December 5, 2022, the government asked domestic bondholders to exchange their instruments for new ones.
It had explained that the existing domestic bonds would be exchanged for a set of four new bonds maturing between 2027 and 2037, with the hope that the programme would help the government restore macroeconomic stability.
But the deadline for the debt swap, which was initially fixed for December 19, was later extended to December 30 and then to January 16.
In Ofori-Atta’s tweet on Monday, he said the extension was to allow the government to build consensus while engaging with stakeholders and investors.
“Building consensus is key to a successful economic recovery for Ghana,” he said.
Last year, the International Monetary Fund (IMF) said it was helping Ghana to restore its macroeconomic stability.
This was after Ghana, one of West Africa’s largest economies, approached IMF for support in July, after street protests hit the country over spiralling inflation, currency depreciation, and other economic woes.
On December 13, 2022, IMF and Ghana reached a staff-level agreement for a three-year loan package of $3 billion, after the country “announced a comprehensive debt restructuring”.
