For a few years, alarm bells have been sounding over the issue of Nigeria’s debt and servicing. In recent times, those alarms have turned into constant warnings of how dire the situation may be. The International Monetary Fund, which has always made public its reservations about Africa’s largest economy, has once again sounded its most serious warning: by 2026, debt servicing will consume all of Nigeria’s revenue.
According to the Debt Management Office, Nigeria’s total debt profile rose to its highest level in 2021, reaching a record 39.5 trillion naira (95.78 billion dollars). According to R.E. Essien the IMF Resident, in Nigeria, the macro-fiscal tests carried out on Nigeria show that interest payments could wipe out the country’s entire earnings in only four years. On the week’s penultimate edition of Business Edge, Tolulope Adeleru-Balogun converses with Gospel Obele, Chief Economist of Streetnomics Limited about the impending debt servicing crisis in Nigeria.
From 2017 to date, Nigeria has spent 13.75 trillion naira on debt servicing – almost three times 4.89 trillion naira, the total figure it spent in the preceding five years. This debt servicing cost represents over 19% of Nigeria’s total annual real GDP. In ten years, the country’s debt to GDP ratio skyrocketed from 21.6% to 96%. “The IMF has a very solid argument, particularly because it’s been keeping track of the Nigerian economy for a long time, and also knowing that there’s been a long people of fiscal indiscipline and how debt has been managed,” Obele says. While the scenario painted by the IMF is indeed likely, he also thinks it’s important to draw out the positives and find ways to shore up revenue as well as ensure those debt monies are deployed in productive and effective ways.
The full conversation on Business Edge is above.
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