The Managing Director and Chief Executive Officer of Financial Derivatives Company Limited, Bismarck Rewane, has suggested three ways for Nigeria to tackle its debt challenge.
This was outlined In the Financial Derivatives Monthly Economic Update, accessed by The Punch.
Outlined options are approaching the International Monetary Fund for a policy support instrument, debt conversion, and debt restructuring.
He explained that implementing these options could help the country to resolve its lingering debt burden.
The PSI option would allow the IMF to provide policy advice and support on economic policies, such as exchange rate and pricing reforms, to promote sustainable economic growth.
In his words, “The PSI is intended to provide a flexible and tailored approach to policy support, with the goal of helping the country develop and implement sound economic policies and promote sustainable economic growth.
“The PSI will necessarily usher in the implementation of critical reform policies such as exchange rate reforms, subsidy and pricing reforms, and other market reforms aimed at removing production impediments and increasing public revenue.
“The PSI will help Nigeria meet the ‘conditionalities’ for a talk with its creditors. A sovereign debt restructuring can take several forms, depending on the severity of the country’s financial situation and the willingness of its creditors to negotiate.”
He added, “Some possible forms of debt restructuring include debt cancellation, debt restructuring, and debt conversion.”
Speaking about the option of debt restructuring, Rewane said, “This is not necessarily a separate option from the PSI, but remains feasible because sovereign default is a kiss of death and, thus, not an option”.
According to the statement, debt restructuring could take the form of debt cancellation, debt restructuring, or debt conversion, depending on the severity of the country’s financial situation and the willingness of its creditors to negotiate.
Another strategy is fiscal consolidation which was referred to as a difficult choice that the new administration must consider to save the economy from collapse.
In his words, “Fiscal consolidation involves difficult choices that eventually have significant social and economic impacts. In the end, doing nothing is not an option.
“The new administration must make the hard choices to save the economy from collapse. Flagrant violations of the Fiscal Responsibility Act must be discontinued.”