In its recently concluded Article IV Consultation, the International Monetary Fund announced its outlook for Africa’s biggest economy, Nigeria. The issue of the country’s debt features prominently, especially the fact that Nigeria will spend 92% of its revenue servicing various debts, and calls into question the debt sustainability of the country. The IMF in the same vein suggested a number of steps the country could take to stabilize and recover. One of these is the subsidies paid on petroleum products which is a sore point for many Nigerians. It continues to be a topic of conversation. Tuesday’s Business Edge discusses Nigeria’s economic viability, in light of the assessment by the IMF. Tolulope Adeleru-Balogun is joined by Dr Andrew Nevin, the Chief Economist at PwC Nigeria.
Dr Nevin explains that although the 92% figure looks shocking at first sight, Nigerian doesn’t have a debt problem: what it does have is a growth problem. “The official size of the economy is two hundred trillion naira and when rebased, it could add as much as fifty trillion naira… [Economists] don’t have an issue with Nigeria’s debt status as it’s relatively a small economy. The problem Nigeria has a growth issue. If we grow 6-8% or 10% a year, we can’t have a debt problem.”
Fixing the growth problem is what government should be concerned with and the IMF strong suggests that the lingering fuel subsidy issue should be solved by simply doing away with it. This year, Nigeria is set to spend 3 trillion naira on fuel subsidies. According to Nevin, this huge amount will be better spent on investment in education, healthcare and other sectors that can directly impact Nigerian citizens. However, he understands that the Buhari administration might be reluctant to remove it as it enters its final year. Along with the removal of subsidies, Dr Nevin also agrees with the decision of the Central Bank of Nigeria not being the sole provider of foreign exchange to banks, saying that they need to source it themselves.
Other topics discussed on Business Edge are in the full video above.