Concerns Grow As Nigeria Faces Another Debt Trap

Concerns Grow As Nigeria Faces Another Debt Trap....KINDLY READ THE FULL STORY HERE▶

Nigeria is plunging deeper into a concerning debt trap, with the country’s debt-to-GDP ratio recently surpassing 50% for the first time since 1991. Initially at 38% when inherited by the Bola Tinubu administration, the ratio has surged to 52.9% due to new borrowings, securitisation of Ways and Means advances, fiscal mismanagement, including low crude output amidst escalating government expenditures, and sluggish GDP growth……… CONTINUE READING

This exceeds the International Monetary Fund’s recommended prudential debt ceiling of 40% for developing countries, raising serious doubts about Nigeria’s debt sustainability. Alarmingly, 30% of the 2024 budget has been allocated to servicing these debts, highlighting the fiscal strain.

According to recent figures from the Debt Management Office, Nigeria’s public debt stands at N121 trillion, comprising N65.6 trillion domestic and N56 trillion foreign debt. Despite previously maintaining a relatively lower debt-to-GDP ratio compared to its African counterparts, Nigeria now faces challenges akin to nations like Ghana (84.9%), South Africa (72.2%), Kenya (70.1%), and Egypt (95.8%).

The escalating debt burden severely restricts Nigeria’s ability to secure further borrowing for budget deficit financing. Debt servicing costs have soared, reaching N7.8 trillion in 2023—a staggering 121% increase from the previous year’s N3.52 trillion. Projections by PwC suggest these costs could escalate further, potentially reaching N11.1 trillion by 2026, impacting credit ratings and borrowing costs.

Reflecting on Nigeria’s past debt crisis in 2005, where a $36 billion debt was settled through a $12 billion payment, the country now faces a similar trajectory of escalating debt amidst inadequate infrastructural development. Railways, roads, health, education, and power sectors remain underdeveloped, while public funds seemingly benefit only political elites and government employees.

This resurgence in public debt underlines the National Assembly’s failure to provide robust oversight, allowing unchecked executive fiscal policies. There is an urgent need for enhanced financial management, curbing fiscal leakages, and promoting accountability to steer Nigeria away from the precipice of another debt crisis.

The Minister of Finance, Wale Edun, must implement prudent measures to ensure Nigeria’s debt profile remains sustainable amidst mounting economic challenges.