3 weeks ago
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The disclosure made last week by the International Monetary Fund that Nigeria is still borrowing amid high debt costs indicates that the country’s economy is still on the edge and may soon reach a tipping point. The Federal Government needs to stop relying on borrowing and find alternative means of revenue generation.
During a press conference on the global financial stability report at the IMF/World Bank meetings in Washington DC, USA, the IMF’s Financial Counsellor and Director of Monetary and Capital Markets, Tobias Adrian, noted that Nigeria and other frontier markets have maintained significant activity in the debt market throughout 2024, even though financing costs have surged compared to pre-2021 levels.
He said, “Frontier markets, including Nigeria, have been active in the debt market this year, and though access to financing is still more expensive than before, the overall issuance levels have been encouraging.”
Although the IMF expressed support for the country’s recent monetary policy measures, particularly the Central Bank of Nigeria’s interest rate hikes and foreign exchange reforms, it has denied supporting President Bola Tinubu’s removal of the fuel subsidy which has further plunged the economy into dire straits.
According to the latest World Economic Outlook report released Tuesday last week, Nigeria’s economy is expected to grow at 2.9 per cent in 2024, maintaining the same growth pace recorded in 2023. Sadly, the loans obtained by Nigerian leaders are primarily geared towards consumption instead of productive sectors.
This adjustment reflects the IMF’s cautious stance on the challenges facing emerging markets, including Nigeria. The IMF pointed out that this revision “reflects slower growth in Nigeria, amid weaker-than-expected activity in the first half of the year.”
The Debt Management Office in June revealed that the country’s total public debt reached N121.67 trillion, increasing by N24.3 trillion or 24.99 per cent within three months. The report read, “Nigeria’s total public debt stood at N121.67 trillion ($91.46 billion) as of March 31, 2024.
“The comparative figure for December 31, 2023, was N97.34 trillion ($108.23 billion). Total domestic debt was N65.65 trillion ($46.29 billion) while total external debt was N56.02 trillion ($42.12 billion).”
Nigeria is enmeshed in a grim revenue crisis. With the crude oil selling in the international market at an average of $80, about 55 per cent of the country’s crude oil has been mortgaged for loans.
For a country that spent a total of $2.78 billion on debt servicing in the first seven months of 2024, according to data released by CBN, and continues to spend a significant amount of money from its annual budget to the same end, the Federal Government needs to develop creative measures to turn around the economy.
The Federal Government needs to privatise the country’s many assets to generate revenue. Nigeria also needs to grow the non-oil sector by operating a regime of lower interest rates to reduce the cost of borrowing. Nigeria should stop getting loans from international institutions for consumption.
