IMF warns that Nigeria’s foreign debt plan could increase exchange rate risks
Abuja — Nigeria’s plan to increase its foreign borrowing to reduce debt-servicing costs could raise its exchange-rate risks, according to the International Monetary Fund (IMF). The West African nation’s government plans to issue $5.5bn of dollar-denominated debt by the end of the year, most of which would go to refinancing existing domestic debt. The issuance will more than double Nigeria’s outstanding dollar bonds to about $9bn and is in line with a strategy to shift the economy’s debt profile by doubling the portion of foreign debt to 40% of the total. "The IMF understands the authority’s needs to rebalance its portfolio of domestic to foreign debt," Abebe Selassie, director of Washington-based lender’s African department, said by phone last week. "Such a shift would, however, make the economy more vulnerable to exchange-rate depreciation." The naira weakened against the dollar following the crash in the price and output of oil, Nigeria’s biggest export, increasing inflationary pr...
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