Director-general of the Debt Management Office (DMO) Patience Oniha has said Nigeria and other vulnerable countries should be considered for debt restructuring and possible debt cancellation, pointing to the limited fiscal space for a number of ECOWAS countries and the increasing need for infrastructure funding in an environment of slow growth.
The DMO DG made the appeal yesterday at the presentation of report on debt management, restructuring and sustainability in ECOWAS in her Abuja office tagged ‘Debt Management Roundtable’, an initiative of the Nigerian Economic Summit Group (NESG) and Open Society Initiative for West Africa (OSIWA).
According to the World Bank’s World Economic Outlook, sub-Saharan Africa sovereign debt rose from 35.1 per cent of GDP in 2014 to 55.4 per cent in 2019. Revenues are unlikely to grow, a reason Oniha said urgent initiatives and actions are required to deal with the situation.
Oniha insisted that Nigeria and indeed, Africa’s major problem was low revenue generation to take care of the mounting fiscal demands. Revenue to GDP for West Africa is 19.3 per cent. The ratio for some countries is even lower; 9 per cent for Nigeria with a target of 15 per cent. She stressed the need for West African countries to place a sharper focus on domestic resource mobilisation.
“This is where consideration should be given to debt restructuring and possibly debt relief for vulnerable countries to ensure that debt levels within the region are sustainable in the long term. Access to more concessional loans should also be on the radar,” she stated.
In a statement by NESG CEO, ‘Laoye Jaiyeola, he highlighted the depth of research and sub-regional collaboration involved in the production of the report, as well as its significance for sustainable debt management across the region if implemented.
He said: “At the NESG, our mission is an open, inclusive, sustainable and globally competitive economy. We champion sustainable debt management because unsustainable public debt accumulation is inimical to economic growth, not only in Nigeria but ECOWAS as a whole.”
He said Nigeria is a focal point for debt sustainability, considering that the country accounts for 50 per cent and 67 per cent of the region’s total debt and GDP respectively. This behoves us to adopt more sustainable strategies to create the required fiscal space for national development, with positive knock-on effects in other ECOWAS nations.
The DMR Chairman, Taiwo Oyedele, identified corruption in public spending, insecurity, geopolitical challenges, resource overdependency, and a shallow tax base as some major drivers of unsustainable debt. He added: “The DMR report is holistic and includes workable recommendations that, if adopted, can prevent West Africa from getting into a debt trap. Debt in and of itself is not a bad thing. It is what we do with the debt that really counts. So how can we begin to apply the resources that we make – whether internally generated or money borrowed – in an efficient manner to promote productivity and prosperity for our people? The report provides answers that should help steer Nigeria and other ECOWAS countries towards debt sustainability.”
The report provides some background on the ECOWAS fiscal landscape and public debt portfolio, including several policy recommendations for debt sustainability and key performance indicators. It proposes a 10-Point action plan under an integrated strategy for revenue optimisation, expenditure efficiency and debt management.
ECOWAS commissioner for macroeconomic policy & economic research Dr Kofi Konadu Apraku said the main concern with higher debt loads, particularly in ECOWAS, is in its ability to create macroeconomic instability. “High domestic debt crowds out investment for the private sector, while the high cost of debt service channels revenue away from productive investments for the economy.
“Consequently, poor debt management is likely to lead to over-indebtedness and unsustainability of public debt, as was the case in the late nineties of the 20th century. This situation, we remember, was at the origin of the Heavily Indebted Poor Countries (HIPC) initiative from which all the ECOWAS countries, except Cabo Verde and Nigeria, benefited,” Dr Abel Essien who represented him at the event said.
