Prepared by IMF and IDA staffs in collaboration with the Nigerian authorities. Debt data, sustainability issues, and the new debt limit policy were discussed with the authorities in the course of the 2010 Article IV consultation. This DSA follows the IMF and World Bank Staff Guidance Note on the Application of the Joint Fund-Bank Debt Sustainability Framework for Low-Income Countries, January 22, 2010 (available at http://www.imf.org/external/pp/longres.aspx?id=4419 and http://go.worldbank.org/JBKAT4BH40). The analysis updates the 2009 DSA (IMF Country Report for Nigeria 09/315).
The DSA is based on WEO oil price projections as of October, 2010. The recent upward revision in the oil price projections would have a more beneficial impact on debt sustainability.
The government is assumed to resist pressures to loosen the current fiscal policy stance and instead establishes a medium- and long-term sustainable fiscal position.
The authorities announced in December 2010 that the loan from China would be for 20 years with a 2.5 percent interest rate.
The LIC debt sustainability framework (DSF) provides a methodology for assessing external debt sustainability which is guided by indicative, country-specific, debt burden thresholds based on the relative strength of a country’s policies and institutions. Given Nigeria’s rating of 3.44 (medium performer), which is the three year average of the World Bank’s Country Policy and Institutional Assessment (CPIA), the relevant country-specific thresholds are a PV of debt to GDP of 40 percent, a PV of debt to exports of 150 percent, and a debt service to exports ratio of 20 percent.
The PV of the public sector’s gross debt burden would decline throughout with no further accumulation in gross debt from 2017 when the overall balance swings to a surplus.