The World Bank said Monday that Nigeria has failed to meet full disclosure rating conditions on debt reporting for three consecutive years, adding an ugly remark to the nation’s unpleasant debt story.

Nigeria’s public debt stock has risen significantly in the last five years as the country battles economic headwinds emanating from covid-19 and poor fiscal policies. Nigeria’s total public debt stock stood at N41.60 trillion or $100.07 billion as at March 31, 2022, according to data from Debt Management Office (DMO).

The report said the World Bank has in the last three years been monitoring how transparent Nigeria is in its debt reporting practices and found that it did not meet “full disclosure” policy it set for International Development Association (IDA) countries.

“Global studies indicate that debt transparency directly contributes to higher credit ratings, lower borrowing costs, and foreign direct investment (FDI) inflows. Hence, the debt management office took the strategic stance to focus on debt transparency efforts and took several actions to improve public debt reporting and disclosure,” it said.

The Washington-based financial body said that Nigeria failed to publish Annual Borrowing Plans (ABP), adding that guaranteed and non-guaranteed debts were not reported while information on recently contracted loans was also not provided.

The World Bank said these are indicators that Nigeria did not meet the “full disclosure” rating for every single one of the nine categories on the debt transparency Heat Map.

According to the financial organization, debt transparency Heat Map involves data accessibility; instrument coverage, sectoral coverage, information on the contracted loans, periodicity, time range, debt management strategy, annual borrowing plan and other debt statistics/ contingent liabilities (CLs).

Nigeria has been borrowing internally to meet its budget shortfalls. Domestic borrowing accounts for more than 70% of the country’s total debt, including the central bank’s Ways and Means Advances that has topped N19 trillion, according to data from the DMO.

Ways and Means Advances is a loan facility through which the Central Bank of Nigeria finances the government’s budget’s shortfalls.

While there is growing concern over Nigeria’s rising public debt, whose servicing is currently taking about 95% of the country’s revenue, the Ways and Means Advances has become another cause for alarm.

The CBN admitted that the Federal Government’s borrowing from it through the Ways and Means Advances could have adverse effects on the bank’s monetary policy to the detriment of domestic prices and exchange rates.

“The direct consequence of central banks’ financing of deficits are distortions or surges in monetary base leading to adverse effect on domestic prices and exchange rates i.e. macroeconomic instability because of excess liquidity that has been injected into the economy,” it said on its website.

Last November, the World Bank also warned the Nigerian government against borrowing from the CBN to finance budget deficits, saying it puts fiscal pressures on the country’s expenditures. In addition, borrowing from the CBN through the Ways and Means Advances will increase the cost of debt in Nigeria, the World Bank said.

We won the US$60,000 Mhagic Velocity Prize as the best Business School for Entrepreneurs in Africa; excited to use that moment on this piece. It reminds us of the power of vision and innovation. Good People,  Tekedia Institute is excited to announce that we’re adding more topics or expanding existing courseware in the following programs:

1. Tekedia Startup Masterclass: from Startup to Unicorn
2. Tekedia Practice with Internship (agribusiness, digital tech, new energy tracks)
3. Tekedia Industries (agribusiness, digital tech, new energy tracks)

The topics are as follows:

1. Starting a business: key legal components (Nigeria, USA): examines critical legal issues including founders agreement, NDA,  etc.
2. Fundraising for Startups and new businesses: explains pitch deck, fundraising narratives, cap table, term sheet, etc.
3. Building the first version of your product
4. How to listen to customers
5. Go-to-market and influencer marketing strategies
6. How to hire your startup initial technical staff

The courseware will go live on Monday, July 18, 2022 in the Board. We continue to welcome feedback on areas members want the Institute to deepen materials.  Many sample documents like founders agreement, SAFE agreement, etc are already in the Board. You can learn more about Tekedia programs here; we are the best business school for the mastery of entrepreneurial capitalism in Africa.

A few years ago, Ghana pegged 1 cedi to 1 US Dollars. Today, many things have gone bad; you need at least 8 cedi to get 1 USD now. It did not take long.

But for the Euro, that one is intriguing. For the first time in 20 years, 1 USD = 1 Euro and the USD is already pulling ahead in some exchanges. If Russia does go ahead and pause gas supply to Germany, the EU may be rattled.

There are many lessons here: Africa has no reason to be looking for loans and begging the world for help. Look at Russia, they have the same natural resources that we have – and as Europe sanctions it,  both follow the same trajectory: equal opportunity pains. Indeed, they have built a fairly decent economy that can withstand a high voltage sanction. And that voltage is burning kingdoms, empires and nations, with Russia marginally affected, at least in the short-term.

Sure, not here to praise Russia, but I must note that I am impressed by their economic defense and they did it purely from their natural resource wealth. Africa has no reason not to do better. Simply, Russia’s natural resources have worked for it!

In the Igbo Nation, the elders will say “ochu nwa okuko nwe ada, nwa okuko nwe nwenwe oso” [he who chases a chicken will fall and the chicken will get away]. That can only happen when you have economic resilience. I call on the leaders of Nigeria and Africa to architect a future where we build systems that will lift a generation out of poverty and hopelessness.

Comment on LinkedIn Feed

Comment: Context is also important here. Russia has been an established empire for centuries, so straight comparison with fragmented African economies is probably inaccurate. That said, I think I understand the message.

My Response: “Russia has been an established empire for centuries” – that is not relevant here. The USSR collapsed because they failed to build a resilient economy. With oil mess, etc, the empire broke down. Before the birth of the new Russia Federation (RF), many African countries have been around. That messed up USSR, out of it, Russia has risen. If they had not done that, what happened to the old USSR would have happened to RF last quarter.

Africa’s key economies are older than the new RF (yes, post USSR Russia) which withstood the sanctions. That is my message. So, the imperial Russia is not relevant; what is relevant is that the post-USSR Russia did not go down on what killed the old communist empire.

Comment 2: For knowledge sake, how does fiat redenomination help a people’s currency? Does it have any positive impact or value adding? Sierra Leone recently did and I would really want to learn how it benefits a country. Thank you in advance Prof.

Another member Responds to Comment 2: There is absolutely little to no economic value for currency redomination. It is mostly done for accounting or record keeping convenience, or other purposes of cosmetic value. Imagine if you had to be accounting for business using too many digits. It’s also to avoid the Venezuela situation where you would now need to weigh currency notes as opposed to counting them on face value to pay for goods or services. To understand the Ghana situation properly, replace 8 cedi to 1 USD with 80,000 Cedi to 1 USD.

I add that this is only to reflect the actual pre-redomination nominal exchange rate cedi versus the usd. To get the equivalent real value of the usd in Ghana of today, you would have to adjust for purchasing power parity.