US debt crisis may affect Nigeria – Okonjo-Iweala tells us

The current budget row and the possibility of debt default by the United States portend serious danger for Nigeria as the country’s cost of borrowing from the international financial market will likely rise significantly, the Finance Minister, Dr. Ngozi Okonjo-Iweala, has said. She said this while addressing a world press conference on the outcome of the meeting of the Commonwealth Finance Ministers with the leadership of the World Bank and IMF in Washington DC, United States, on Thursday. Okonjo-Iweala said the crisis in the US would not be favourable to yield and interests accruable on two of the nation’s sovereign debt instruments currently being traded in major financial centres across the globe. According to her, the stalemate will make it more expensive for the country to borrow from the international financial market. Nigeria had earlier this year issued a $1bn Eurobond that was heavily subscribed by international investors. That came two years after the Federal Government had sold its first $500m bond in the international financial market. Okonjo-Iweala, however, said the current debt row between the US Congress and the President Barack Obama administration was creating a lot of uncertainty in the global financial market, adding that it might affect the performance of Nigeria’s bond if not resolved urgently. “The present situation in the US creates a lot of uncertainty for developing countries, especially those that have bonds traded in the US market. We hope it is resolved urgently so that it will not hurt the yields and interests on these instruments,” she said. On the efforts of The Commonwealth to encourage member countries to raise more funds for development internally through taxation, Okonjo-Iweala said the issue of tax evasion by multinationals and local entities had now been brought to the forefront of discussions. She said before now, the focus had been on corruption in developing countries, but it had now been accepted that tax evasion had become a big problem. The minister said that an initiative had been set up under the G-8 headed by the Prime Minister of the United Kingdom to look at financial centres and the issue of tax evasion by companies. Similarly, she said the African finance ministers had set up a high powered panel chaired by the former South African President, Thabo Mbeki, to look at the issues of tax evasion and illicit financial flows and their impact on the economies of member states. “This is work in progress and we are trying to look at what we can do; the extent of this problem and exactly what steps we can take to solve the problem,” she said. The minister also said Nigeria and Tanzania were already looking at their tax systems with a view to plugging loopholes and strengthening compliance levels across the board. Okonjo-Iweala pointed out that Nigeria recently hired a South African audit firm, McKenzie, to evaluate issues of delayed remittances of taxes by corporate bodies. On the issue of global trading agreement currently in favour of the developed nations, she said the preference would be for all developing countries to unite for a strong multilateral round at the World Trade Organisation