Nigeria’s participation in the global debt market continues to be robust despite the hurdles posed by rising borrowing costs, according to the International Monetary Fund (IMF).
During a recent press conference at the IMF/World Bank annual meetings in Washington, Tobias Adrian, the IMF’s Financial Counsellor and Director of Monetary and Capital Markets, highlighted that both Nigeria and other frontier markets have maintained significant activity in the debt market throughout 2024. This is notable, given that financing costs have surged compared to levels seen before 2021.
Adrian emphasized that while access to financing has become more expensive, the overall issuance levels from frontier markets, including Nigeria, remain encouraging. He expressed support for Nigeria’s recent monetary policy measures, particularly the Central Bank of Nigeria’s (CBN) interest rate hikes and foreign exchange reforms aimed at stabilizing the economy.
The CBN’s shift towards inflation targeting, along with efforts to liberalize the exchange rate, is viewed as crucial in combating inflation, which has soared close to 30 percent.
These reforms come in the wake of various challenges, including recent natural disasters like floods that have exacerbated living conditions for many Nigerians.
The IMF’s revised economic forecast for Nigeria indicates a projected slowdown in growth for 2024, estimating an expansion of 2.9 percent consistent with 2023’s pace but reflecting a downward adjustment from previous projections.
Deputy Chief of the IMF’s Research Department Jean-Marc Natal, elaborated on the factors contributing to this revision. Disruptions in agriculture and oil production, driven by flooding and security issues, have significantly impacted Nigeria’s economic performance. He pointed out that these vulnerabilities have influenced the overall growth outlook, leading to a cautious stance on the country’s economic prospects.
Looking ahead, the IMF forecasts a modest recovery, projecting growth of 3.2 percent in 2025, which is slightly better than earlier estimates. However, these projections remain conservative compared to those from the World Bank, which anticipates a 3.3 percent growth in 2024, accelerating to 3.6 percent in the following years.
In response to these developments, Nigeria’s Minister of Finance, Wale Edun, held strategic meetings with IMF Managing Director Kristalina Georgieva to discuss the country’s economic growth and the progress of President Bola Tinubu’s reform agenda. Edun underscored the need for increased international support to ensure the success of these reforms, emphasizing the importance of access to adequate and affordable financing.
During discussions, Edun advocated for concessional loans from the IMF and World Bank for Nigeria and other nations undertaking economic reforms. He articulated the challenges faced by African economies amid a global trend toward protectionism and the reversal of globalization. Edun called for a more supportive global financial architecture that offers concessional funding, particularly for countries committed to necessary macroeconomic reforms.
He stressed that such financial support is vital for achieving macroeconomic sustainability while providing a safety net for the poor and vulnerable populations affected by economic adjustments. Emphasizing the importance of communication, Edun noted that effectively conveying the goals and expected outcomes of these reforms is critical for garnering public support and ensuring a smoother transition.
Additionally, the CBN, under Governor Yemi Cardoso, plans to engage the Nigerian diaspora in discussions aimed at boosting remittance inflows, which are crucial for maintaining foreign exchange reserves amid ongoing fiscal challenges.
Overall, while Nigeria faces significant economic hurdles, its ongoing engagement in the global debt market and commitment to reform provide a foundation for potential recovery and growth in the future.
