Nigeria’s Debt servicing to fall following IMF’s new policy on borrowing
Omeiza Bilal
Nigeria may now spend less servicing its debts as the International Monetary Fund (IMF) slashed cost of borrowing by 36 per cent.
Although the country still owes monies from other sources, the reduction in cost of borrowing by the IMF will go a long way in reducing debt service burden, analysts say.
The Executive Board of the International Monetary Fund (IMF) on Saturday agreed to lower borrowing costs for members by 36 per cent or about $1.2 billion annually.
A statement, issued by the IMF Press Centre, said it was the outcome of the fund’s Board Review of Charges and the Surcharge Policy.
It said following the outcome of the meeting, the Fund’s Managing Director Ms Kristalina Georgieva, issued the following statement.
“In a challenging global environment and at a time of high interest rates, our membership has reached consensus on a comprehensive package.
“This package substantially reduces the cost of borrowing, while safeguarding the IMF’s financial capacity to support countries in need.
“The approved measures will lower IMF borrowing costs for members by 36 per cent or about 1.2 billion dollars annually.
“The expected number of countries subject to surcharges in fiscal year 2026 will fall from 20 to 13.
“This is achieved by reducing the margin over the Special Drawing Rights (SDR) interest rate, raising the threshold for level-based surcharges, lowering the rate for time-based surcharges, and increasing the thresholds for commitment fees.”
Georgieva said the approved package would take effect on November 1, 2024.
“While substantially lowered, charges and surcharges remain an essential part of the IMF’s cooperative lending and risk management framework, where all members contribute and all can benefit from support when needed.
“Together, charges and surcharges cover lending intermediation expenses, help accumulate reserves to protect against financial risks, and provide incentives for prudent borrowing.
“This provides a strong financial foundation that allows the IMF to extend vital balance of payments support on affordable terms to member countries when they need it most.”
The IMF boss said the reforms would help ensure that the IMF would continue serving its members in a changing world.
The statement said charges and surcharges did not apply to borrowing from the IMF’s Poverty Reduction and Growth Trust, under which low-income members receive financial support on concessional terms. #IMF Lowers Borrowing Costs by 36%