Nigeria signed out, could save $ 432.6 million on debt suspension – World Bank

The World Bank has announced that the debt-suspension initiative could save Nigeria about $ 432.6 million from May 2020 to December 2021.

It announced this in an abridged version of COVID-19: Debt Service Suspension Initiative, updated by the bank on its website.

According to the DSSI, the official creditors undertake to suspend payments for all principal and interest payments received within a specified period.

The World Bank, in its abstract, has given an estimate of what various countries, including Nigeria, could save if creditors stopped paying for all principal and interest payments within a 20-month period.

However, Nigeria is not benefiting from this initiative, which, according to the contract, could contribute 0.1 percent to Nigeria’s gross domestic product.

Although Nigeria is one of the World Bank’s largest borrowers, it does not fall under the Joint Bank Fund debt sustainability framework for low-income countries.

In a separate document that the World Bank published in April this year – the Debt Report 2021 Edition II – the bank provided a rationale for countries that do not yet benefit from the DSSI.

The report said that while some countries were eligible for the DSSI, they chose not to participate for a number of reasons.

The reasons included false signals to bondholders and other private creditors.

The report states: “Some DSSI-eligible countries have so far decided against participating. Currently, 27 DSSI-eligible countries, 37 percent of the eligible countries, are not participating in the initiative for various reasons.

“Some fear that a stake could send the wrong signal to bondholders and other private creditors, while others find that the amount of eligible bilateral debt servicing was negligible and that the savings do not justify the administrative burden of the deferral.

“With the DSSI only postponing payment to a later date, some policy makers fear that long-term debt sustainability could be sacrificed for short-term financial flexibility.”

It was also revealed that Nigeria owed 41 percent of its external debt to private creditors, particularly bondholders.

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