By Elizabeth Chukwuma
This is not the best of times for Nigerian and other developing countries. This is because virtually all the revenue the countries appears to have generated in oil and other agricultural exports had continuously been used to pay debts.
Nuhu Ribadu, a former Chairman, Economic and Financial Crimes Commission, EFCC and now President Bola Ahmed National Security Adviser, NSA, may have used Nigeria as a test case when he disclosed recently in the country.
He had said that the revenue that had been generated by President Bola Ahmed Tinubu’s Administration between May 29, 2023 and now had been used to repay the loan that was borrowed by the previous Administrations, particular, the Buhari’s Administration from the World Bank/IMF and other Multilateral financial Institutions including the London Club and Paris Club to run his eight -old government.
The NSA had told the bewildered Nigerians who are worried over the slow pace of action of President Tinubu, described as a former action governor of Lagos state to deliver on his electioneering Campaign promises of fixing Nigerian battered economy and dilapidated roads that the financial Constraint had affected he new government budgetary allocation to execute projects.
The World Bank had said that as at December 13, 2023, amid the surge in global interest rates over the last 40 years, Nigerian and other developing countries , including Mozambique, another African country, which it had approved the North American country of the United States, US, $300 million credit to access finance and execute projects spent $443.5 billion to service their external and publicly guaranteed debt in 2022 alone. Shows. That much was said to have been contained in the World Bank’s latest International Debt Report, IDR,
The global bank had reported that the Debt-service payments include ‘’principal and interest’’, which a source confirmed had increased by five percent over the previous year for all the developing countries. Note that the 75 countries eligible to borrow for the World Bank’s International Development Association, IDA, which supports the poorest countries, particular, were said to have paid $ billion 88.9 in debt-servicing cost in 2022.
There is no gain saying the fact that the surging interest rate which have intensified the debt vulnerabilities in the developing countries over the last three years had made their debt burden greater than the figure recorded in the past two decades put together.
It is not surprising why about 60% of the low -incomes are currently at ‘’the risk of debt distress’’ begging for debt for debt forgiveness. The Value News findings shows that interest payments on the borrowed funds consume an increasingly large share of low-income countries earnings from exports.
Many of the debtor nations , according a World Bank report face additional burden because of the accumulated borrowed amount from the Internal Bank, interest and fees incurred for the privilege of debt-service suspension under the G-20’s Debt Service Suspension Initiative, DSSI.
More wore worrisome is the stronger US dollar which is used in international transactions for payment which financial analysts had said is adding to the developing and low-income countries debt problem , thus making it even making it more expensive for the countries to make payments as expected.
Take for instance, the Central Bank of Nigeria, CBN, under the close watch of Olayemi Michael Cardosooperated Autonomous Foreign Exchange market, AFEM as at December 12, 2023, the local currency exchanged for N1,099.00 to the North America country of the United States one dollar while it crashed to N1,230.00 to one US dollar at the parallel window market on December 16, 2023.
At present , the exchange rate for calculations of clearing cargoes at the nation’s seaports, airport and Land border areas was said to have been raised to N952.00 to the US one dollar but there had been indications that the gap between the official and the parallel window exchange rates narrows in the coming trading weeks, and that the local currency may hit the N1000.00 to one US dollar at the spot market. True to the predictions of the likes of Cardoso, the CBN, governor and Mele Kolo Kyari, the local currency has crossed the N1000.00 market to the US one dollar at the AFEM, fuelling speculations making the rounds hat President Bola Ahmed Tinubu’s target of seeing the country’s official and
Notwithstanding the increased demand for the US dollar at both the official and parallel window foreign exchange window which had caused the continuous depreciation of the naira, the CBN, Authorities has affirmed their commitment to implementing strategies aimed at addressing the country’s staggered foreign exchange rate and surging inflation rates .
While the country’s inflation rate, according to the National Bureau of Statistics, NBS, had jumped to 27.33% in the month of November , 2023, the highest in 18 years, the CBN governor had said that it will slump in 2024 He further noted that foreign exchange rate pressures at both the AFEM and parallel window market rates are also expected to decline significantly with the smooth functioning of the two distinct forex markets.
