Nigeria’s economy is weakening as its total debt climbed to $103.11 billion with spiralling inflation and unemployment. The dire economic situation is what the country’s outgoing President Muhammadu Buhari would hand over to the incoming president on May 29, 2023.
According to Nigeria’s Debt Management Office (DMO), the total public debt stock of the country consisted of the domestic and external debts of the Federal Government of Nigeria (FGN) and its 36 state governments.
DMO in a statement on its website took a comparative debt stock and reported that Nigeria’s debt as of December 31, 2021 was $95.77 billion. In terms of composition, DMO said the country’s total domestic debt stock stood at $61.42 billion while total external debt stock was $41.69 billion.
“Among the reasons for the increase in total public debt stock were new borrowings by the Nigerian government and its state governments, primarily to finance budget deficits and execute projects. The issuance of promissory notes by the country’s regime to settle some liabilities also contributed to growth in the debt stock,’’ the office said in its latest release in Abuja.
However, DMO said that said that ongoing efforts by the government to increase revenue from oil and non-oil sectors through initiatives like the Nigerian Finance Acts and the Strategic Revenue Mobilisation Initiative were expected to support debt sustainability.
‘Debt-to-GDP within limits’ It said that the total debt-to- gross domestic product (GDP) ratio for December 31, 2022 was 23.20 percent, indicating a slight increase from the figure of December 31, 2021 at 22.47 percent.
“The ratio of 23.20 percent is within the 40 percent limit self-imposed by Nigeria and the 55 percent limit recommend by World Bank/International Monetary Fund (IMF). It is also within the 70 percent limit recommend by the Economic Community of West African States (Ecowas),’’ it said. Nigeria’s total public debt stock as released by DMO excludes the country’s $46.8 billion indebtedness to the Central Bank of Nigeria (CBN), through Ways and Means advances.
The Ways and Means advances are presently awaiting securitisation by Nigeria’s National Assembly and can only be added to the country’s public debt after such securitisation. Sounding an encouraging note, however, it said that Nigeria’s debt-to-GDP was within limits but fell short of espousing its implications to inflation and growing unemployment.
Unemployment to remain unabated Nigeria’s National Economic Summit Group (NESG) has berated the growing inflationary pressure which remained elevated, driven by structural, cost and monetary factors. NESG also projected that the country’s unemployment rate will hit 37 percent before the end of 2023.
The group in its 2023 macroeconomic outlook report said the country’s poverty headcount will also rise to 45 percent. The report said that due to weak performance in the job-elastic sectors, and low labor absorption of sectors that will drive growth, Nigeria’s population growth estimated at 3.2 percent will lead to a decline in real per capita income.
The report also noted that the country’s GDP growth is also expected to moderate to 2.98 percent, as economic growth will be subdued in 2023 due to strains on investment and low productivity in critical sectors. “The services sector will drive economic growth, but this growth will not be strong enough to generate significant jobs,” the report said.
As a result, it said Nigeria’s unemployment will remain unabated while economic growth will be supported by election-related spending and improvement in the oil sector. The report further revealed that the country’s inflation rate will average 20.5 per cent in 2023.
“Inflationary pressure is expected to remain elevated, driven by structural, cost and monetary factors. Food inflation will remain the fundamental driver of inflation due to the enduring impact of flooding, increased production costs due to increased cost of credit, insecurity and displacement. Existing fuel shortages and the removal of fuel subsidies will continue to increase the core components especially transportation,” it said.
It said that in 2023, Nigeria’s foreign capital inflow will decline saying its trade surplus will be sustained. Albeit lower, its foreign reserve will deplete further, and exchange rate pressure will persist.
Source: The East African
The Ethiopian Herald April 5 2023
