G20 offers Nigeria and 75 other developing nations debt service relief as Covid-19 devastates their economies

NIGERIA and 75 other countries have been granted debt service relief by the World Bank and China as part of a much-needed global stimulus package required to rejuvenate the world economy following the devastation caused by the coronavirus pandemic.

With the pandemic forcing economies to drastically reduce output, many countries are facing economic ruin, high unemployment and in worst case scenarios total meltdown. Nigeria has been particularly hard-hit because she is a mono-economy dependent on the sale of crude oil and demand has more or less totally ceased at the moment, while prices have collapsed to near production costs.

Faced with a crisis likely to be more devastating than the virus itself, Nigeria will find it impossible to fund her 2020 budget of $28.8bn and this has already been revised downwards twice. Realising the precarious predicament many developing nations face, the G20 group of the world's largest economies met on Wednesday and decided to offer them debt relief.

At the end of the meeting in Saudi Arabia on Wednesday, the world's 20 largest economies agreed to a relief, which will mean that Nigeria and other developing nations will not be liable to service  some of her debts for the rest of the year. All bilateral official creditors have been directed to participate in this initiative, consistent with their national laws and internal procedures.

One source from the meeting said: “We will benefit to the extent that the principal and interest repayments falling due which to our understanding is a debt service suspension (not forgiveness) until the end of 2020. The benefit to Nigeria will be the fiscal space created through debt rescheduling and interest payments which we are obligated to countries like China and also the World Bank.

“The G20 expressed support for a time-bound suspension of debt service payments for the poorest countries that request forbearance. They agreed on a coordinated approach with a common term sheet providing the key features for this debt service suspension initiative, which is also agreed by the Paris Club.”

At the meeting, the G20 leaders cautioned that international support is needed to help countries combat the Covid-19 outbreak and its health and economic impacts. They added that important steps have already been taken by the International Monetary Fund (IMF), World Bank, Regional Development Banks and central banks but more needs to be done.

In addition, the G20 encouraged multilateral development banks to work closely together and with development partners at the country level to ensure consistency, optimise the use of resources, ensure debt remains sustainable and maximize the development impact. The G20 is made up of Argentina, Australia, Brazil, Canada, China, Germany, France, India, Indonesia, Italy, Japan, Mexico, Russian Federation, Saudi Arabia, South Africa, South Korea, Turkey, UK, the European Union and the US.