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Debt crisis in Nigeria: A thing of concern

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By Abiodun Okunloye

Giant of Africa is plagued with economic crisis and accountability problems.

Nigeria, known as the “Giant of Africa,” is well-known not only for the abundance of its cultural legacy and natural riches but also for the complexity of the economic issues it faces. The overall amount of debt held by the Nigerian government is an essential factor that has received a lot of attention both at home and abroad. Debt is not in and of itself a terrible thing; the improper mindset and approach can turn it into something detrimental. For it to be managed successfully, the debtor must feel a feeling of responsibility. However, Nigeria has been plagued with bad leadership and fund mismanagement challenge.

The country’s external debt rose to US$29 billion at the end of 2000 due to a number of causes. The major factors include the increase in public spending, especially on capital projects, the reliance on imports, a fall in oil earnings beginning in the late 1970s, and lending from the international community at non-concessional interest rates. In 1986, the proportion of short and medium term loans to overall debt was approximately 85 percent. The changes caused a spike in interest rates and principal payments due to the bunching of debt services. The level of the foreign debt stock was also impacted by interest rate hikes.

National public debt surged during Buhari’s Administration.

An analysis by PREMIUM TIMES shows that the Buhari administration has been responsible for the largest increase in Nigeria’s public debt since 1999 and that the country’s foreign debt has increased by a factor of three throughout his tenure compared to the records under the preceding three administrations combined. In 1999, the Obasanjo administration incurred $28 billion in international debt; by 2007, it had only $2.11 billion remaining after having secured a write-off from the London and Paris clubs of foreign creditors. Moreover, the Yar’adua/Jonathan administration added $1.39 billion to what they already owed, and the Jonathan governance added another $3.8 billion, making the country’s overall foreign debt $7.3 billion in 2015

More so, at the end of 2020, Nigeria had borrowed a total of $28.57 billion externally, an increase of $21.27 billion under Buhari’s watch and three times the sum borrowed by all previous governments in Nigeria since 1999. While international debt is more detrimental to the value of the Naira, local debt increased from N795 billion in 1999 when the administration of Obasanjo took office to N8.8 trillion in 2015 when the Buhari government took office. Domestic debt in Nigeria reached N16.02 trillion by December 2020, more than double what the country’s previous three governments had borrowed.

Buhari’s N23 trillion loan approval request spiked senate concerns.

Following President Muhammadu Buhari’s demand for a delayed approval for the N23.7 trillion loan, which already had been spent, leading to a commotion within the Senate, in January 2023, Nigeria’s Debt Management Office (DMO) declared that if the N23 trillion loan from the CBN is securitized, the incoming administration will take on a public debt of N77 trillion. Lawmakers disapproved the request, and the president was accused of going outside the Constitution. They requested specifics regarding the use of the money in question.

Considering reports that the incoming administration could inherit a total public debt stock of roughly N77 trillion, securitization will improve debt transparency since the DMO can add debt to the total public debt pool. If securitization is successful, an overview of the expected total public debt stock by May 2023 may include the current total public debt stock, which is N44.06 trillion, the Ways and Means Advances, which amount to N22.72 trillion and are now being considered by lawmakers. The DMO head further noted that the anticipated debt stock for May 2023 is still around N5.567 trillion.

External and domestic debt rose to N44.06 trillion in 2022 Q3.

According to the report on Nigerian domestic and foreign debt from the National Bureau of Statistics, the country’s total public debt stock, which consists of both external and domestic debt, increased from N42.84 trillion ($103.31 billion) in the 2022 Q2 to N44.06 trillion ($101.91 billion) in the Q3 of that same year. Furthermore, the number represents a 2.84% increase in the country’s accumulated monetary debt throughout the reporting period. The total debt consisted of the debt stock held by the federal government, as well as the debt stock held by each of the 36 state governments and FCT. The report added that the country’s domestic debt was at N26.91 trillion during the period under review.

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