Economy: Nigeria battles insolvency as borrowing escalates

Of recent, the question on the lips of not a few economic commentators on Nigeria, as they scan the numbers charts, is whether Nigeria is sliding into economic doldrums.

Even if the response to this question is not in the affirmative, the prospect of the country being potentially insolvent at the moment is not a far-fetched guestimate by many discerning Nigerians and other observers elsewhere who feel that the country’s mountainous debt pile may be dragging it down the hill economically.

The unfolding events did not surprise people when the Governor-elect of Anambra State, Prof. Chukwuma Soludo recently expressed discomfort that the country was still not sure if it had what it takes to forge ahead economically or was beckoning towards insolvency.

Soludo expressed this concern in a recent speech, titled: “The purpose and price of disruptive change”, at the graduation ceremony of students of the School of Politics, Policy and Governance (SPPG).

Many observers have pointed out that the economy of the country appears to be not only in danger, but it appears to be deteriorating daily. Unfortunately, out of the budget of N17 trillion in 2022, the budget deficit harbours N6.25trillion (3.39% of GDP) and this figure will definitely increase given the reinstated funding of fuel subsidy to the tune of N3 trillion (17.5% of the budget) in 2022. There is a consensus that FG must borrow to fund the increased budget deficit.

As government debt continues to increase, this government has accumulated a total debt stock of about N28 trillion in the last six years and is still in the process of accumulating more.

According to the Debt Management Office, Nigeria’s total debt stock stood at N38.004 trillion as of September 30, 2021, while the Medium Term Expenditure Framework (MTEF) has outlined that Nigeria will borrow a further N14.8tr between 2022 and 2024. According to the document, the projected figure for 2022 stands at N4.89 trillion. This is further broken into domestic borrowing of N2.44tr and N2.44tr for foreign borrowing.
Figures on the document also revealed that between the same period, Nigeria will spend N14.6 trillion on debt servicing.

Many worry however that these projections can only work on paper and not realistic. Already analysts believe that the nation is being plunged into another round of deeper indebtedness given that debt-to-revenue, which now stands at about 60 percent.

Whereas many analysts believe the country’s total debt may hover between N40tr to N45tr before the end of 2022, debt/serving ratio will jump higher. In fact, the ratio hovered around 80-85% in 2021, while it stood at 99% in the first quarter of 2020. Analysts project that the ratio will go higher in the present circumstances.

The fear of many discerning Nigerians has been that the country’s debt may be headed to about N40 trillion if conscious efforts continue to be ignored to apply adequate strategies to reverse this trend.

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