The International Monetary Fund (IMF) has disclosed that Nigeria and other frontier markets have remained very active in the global debt market.
This is despite Nigeria’s rising debt profile which stands at a whopping $42.12 billion at the end of Q1/2024 according to the National Bureau of Statistics.
Reacting to this during a press conference on the Global Financial Stability Report at the IMF/World Bank annual meetings in Washington DC yesterday, the IMF’s Financial Counsellor and Director of Monetary and Capital Markets, Tobias Adrian, disclosed that Nigeria and other frontier markets have maintained significant activity in the debt market throughout 2024, even though financing costs have surged compared to pre-2021 levels.
He said, “Frontier markets, including Nigeria, have been active in the debt market this year, and though access to financing is still more expensive than before, the overall issuance levels have been encouraging.”
“On overall indebtedness, that is a challenge for some countries. As I mentioned earlier, frontier markets are developing economies with market access. And we have seen many frontier markets issue this year.
“The issuance levels are fairly high. And we think market access is there, though, of course, financing conditions have improved but are still more expensive than they were, say, in 2021, before the run‑up in inflation” he disclosed.
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However, the IMF expressed support for Nigeria’s recent monetary policy measures, particularly the Central Bank of Nigeria’s interest rate hikes and foreign exchange reforms, which have been designed to stabilise the economy.
Adrian noted that the CBN’s shift toward inflation targeting and its efforts to liberalise the exchange rate has been crucial in addressing inflation, which remains close to 30 per cent.
Adrian further stressed the importance of these reforms, particularly given the inflationary pressures compounded by recent natural disasters, such as floods, which have worsened living conditions for many Nigerians.
“For developing economies broadly, I would say that there are three priorities. In terms of financial stability, we are engaging with many countries in terms of building capacity on regulatory issues, so making sure that banks are well capitalized, that monetary policy frameworks are sound. And Nigeria is a good example, where the central bank has been moving toward an inflation‑targeting regime, has liberalized the exchange rate. And we welcome that direction.
“So, with inflation coming down and interest rates expected to further normalize, we would also expect that frontier market funding conditions will improve. And as I said, interest rate spreads are fairly tight” he added.
By: Babajide Okeowo
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