The International Monetary Fund (IMF) has urged countries including Nigeria to ensure that the terms are favourable for the borrower when they borrow from abroad.
The Financial Counselor and Director of the Monetary and Capital Markets Department of the IMF, Tobias Adrian made the remark at the press briefing on the Global Financial Stability Report (GFSR) at the ongoing springs meeting of the World Bank and IMF in Washington DC.
Speaking on the growing investments of China in Africa, Adrian said capital flows in general are important for development but what is very important is the lending arrangement and the terms of the loan.
“In particular, we tend to recommend that the loans to countries should be conforming to Paris club arrangements and that is not always the case of loans from China,” he added.He said at the moment, funding conditions in economies such as Nigeria and other sub saharan African countries are very favourable but that might change at some point.
Adrian said: “So Nigeria has been borrowing in the international market but we worry. So on the one hand, that is very good because it allows Nigeria to invest more but on the other hand, we do worry about rollover risk going forward.
And there is a risk of whether these needs for refinancing can be met in the future.”Government debt, which has been an important source of financing, along with debt servicing cost has risen rapidly in recent years, Daily Trust recalls.