Nigeria’s $58b Debt Threatens Growth

Economic experts have cautioned the federal government in Nigeria against further borrowing, saying the country’s debt profile of N19 trillion ($58.55 billion) portends danger for the economy.

They said the country’s debt, which has been increasing in the last few years, was becoming unsustainable as it might be difficult to service it due to the revenue challenges facing the country, Punch reported.

Talking to Punch, experts said that rather than continue to rely on borrowing to finance its activities, the federal government should adopt other sources of funding the infrastructural needs of the country. These, according to them, include concession, privatization and public-private partnership arrangements.

Those who spoke on the subject were the president, Institute of Fiscal Studies of Nigeria, Godwin Ighedosa; a former acting managing director of Unity Bank of Nigeria Plc, Rislanudeen Muhammed; and director general of Abuja Chamber of Commerce and Industry, Chijioke Ekechukwu.

Ekechukwu said, “It is expected that the debt profile of the country will rise considering the fact that we have a deficit budget and even the deficit side of the budget was not met in the last budget year. With the recession of last year, government will need to continue borrowing to meet the increased size of the deficit. Of course, the borrowing portends danger for the economy because our debt profile is rising and we do not know when we are going to scale it down.”

Muhammed said Nigerians needed to be worried about the country’s debt burden rising at a faster rate than revenue generation. He stated that if something urgent was not done to shore up revenue, it would be difficult for the government to meet its debt servicing obligation.

Ighedosa noted that while it was not bad to borrow, there was a need for a reduction in government expenditure.

The director general of the budget office of the federation, Ben Akabueze, however, said that the country’s debt profile was sustainable. He maintained that the country’ debt profile was still within the globally accepted threshold, and argued that rather than worry about the level of borrowing, the priority should be on how to shore up revenue that would enable government finance its programs.

Akabueze stated that the current level of revenue generation in the country was too small to fund an economy the size of Nigeria, noting the country had one of the lowest tax to gross domestic product ratio in the world.”