Bismarck Rewane, the Managing Director/CEO at Financial Derivatives, said Nigeria is tolling a path where it has no choice but to restructure its debt sooner or later.
He stated this during an appearance on Arise TV to comment on Nigeria’s debt overload which is about to be passed on to the incoming administration.
His take: Although the finance ministry has been emphatic that debt restructuring is not going to happen, Rewane noted that Nigeria has gotten to a point where it has no choice but to restructure its debt.
According to him, the federal government is only saying otherwise because they are trying not to cause panic. He said:
- “The finance minister with all due respect is doing her job and saying what should be said. The job of the finance minister and central bank governor is not to cause panic but the reality is that this is a 12-week game. After 12 weeks, nobody’s going to look in that direction.
- “The debt level at even 35% of GDP is not staggering compared to others, but the reality is that if it was 10% of GDP 10 years ago and it is now 35%, the trend shows that you are growing your debt a level which could be unsustainable.
- “Secondly, what have you done with the debt? Debts are liabilities. You have to look at the asset side of the balance sheet and say what has Nigeria achieved with the debt it has accumulated – both domestic and international.”
More reasons for restructuring: Further analyzing the issue, Rewane noted that the economy has not performed that well and the way forward would be to restructure. He said:
- “Labour productivity is flat and negative, the total factor of productivity which is the test for the optimal use of capital stock in the country is 0.7% and it was even negative before then. It shows really from an economic evaluation policy and impact analysis, that the economy has not done that well. It is suboptimal, to put it mildly.
- “Therefore what happens is; as a prodigal son, you finish the food, sell your father’s wealth and you go borrow and then come back home. The reality is you must restructure your debt, you must go to your creditors and ask for forbearance so that you can now begin to grow. Nigeria has become a prodigal economy which means we now have to go back to the basics and do the right thing.”
What you should know: The minister of finance, Zainab Ahmed has stated that there are no plans to restructure Nigeria’s debt as the country has a debt strategy that could be followed closely. According to the minister, the 33% debt to GDP ratio of Nigeria’s debt is still the lowest when placed beside countries with equal comparatives.
