Nigerian Economic Summit Group and the Open Society Initiative for West Africa, have published a report that unveils the economic situation of Nigeria and other Economic Community of West African States countries (ECOWAS).
Recently launched at the Debt Management office in Abuja with the title; “Debt Management, restricting and Sustainability in ECOWAS,” the Nigeria and other African countries who are at “low risk of debt distress.”
Excerpts from the report:
“According to the debt sustainability analysis, 11 ECOWAS countries – Benin, Burkina Faso, Cabo Verde, the Gambia, Ghana, Guinea Bissau, Liberia, Niger, Nigeria, Senegal and Togo – are currently in debt distress. However, the remaining four countries – Côte d’Ivoire, Guinea, Mali and Sierra Leone – are at low risk of debt distress.
“We also find that a financial catastrophe occasioned by a debt crisis in one country may spread throughout the region. The financial woes in Nigeria, in particular, portends a serious threat to other nations in the region.
“As it stands out that public debt accumulation in ECOWAS has become unsustainable, countries need to act early to avert the impending debt distress. This is important for ECOWAS countries to avoid a lost decade of getting to a debt crisis where debt settlement will be the government’s only agenda for years to come.
“Beyond the debt figures, there are numerous indicators of debt sustainability position (Debt to GDP, External Debt to GDP, Debt Service to Revenue and a host of other ratios) in which the IMF has provided benchmarks. However, many countries have based their debt sustainability decisions on debt indicators that give room for more borrowing.
“However, the debt service to revenue ratio has been a major challenge for debt management in ECOWAS – close to 100 per cent for some countries. This is more precarious for Nigeria that recorded 97 per cent debt service to revenue in the first five months of 2021.
“The situation where debt service to revenue is close or over 100 per cent in some ECOWAS countries, as is in Nigeria, portends a debt cycle of borrowing to service debt and risk a potential debt crisis.
“The possibility of a debt crisis in some countries in the region, particularly in Nigeria, will have adverse impacts on public and private investment, foreign investment inflows, aggregate demand and the stability of the macroeconomy at large.
“Following the growing economic integration among ECOWAS countries and the relevance of Nigeria in the economic structure of the region, the fallout from a debt crisis in Nigeria could have a destabilising impact on other countries in ECOWAS,” the report detailed.
World Bank placed Nigeria fifth, among the top 10 countries with the highest debt risk exposure.
As at December 2021, the country’s total debt stock was N39.55trillion.