Currently, Nigeria is facing a significant increase in external debt, reaching around $45 billion, alongside a noticeable departure of investors. Tilewa Adebajo, the CEO of CFG Advisory, has highlighted the importance of quick legislative action and a thorough revamp of Nigeria’s trade, industrialization, and Investment strategies. The most recent report from the Debt Management Office (DMO) revealed that Nigeria’s total debt, made up of both external and internal obligations, has surged to ₦121.67 trillion as of March 31, 2024.
This number signifies a significant increase from the ₦97 trillion that was previously reported. In the fourth quarter of 2023, a total debt of ₦34 trillion was reported, encompassing the financial obligations of the federal government of Nigeria, all 36 states, and the Federal Capital Territory (FCT). During the bi-monthly meeting of the Finance Correspondents Association of Nigeria (FICAN) in Lagos, Adebajo pointed out that certain Credit Rating Agencies (CRAs) have given the country favourable outlook ratings.
Implementing new laws is essential to address the financial disparities.
Also, Nigeria is still currently classified as a junk bond by Moody’s Ratings with a Caa1 rating. The risks to the economic recovery of the country were emphasized in his declaration, pointing out the threat of excessive fiscal spending and unauthorized financing methods. The current level surpasses the legal limit by 30 times, amounting to ₦30 trillion. If not addressed, this could impede the transition of the country from Stagflation to consistent growth by 2024.
Adebajo stressed the critical importance of Nigeria addressing the rising costs of servicing its debt, which far surpass its revenue. He proposed that implementing new laws is essential in order to address the financial disparities. Additionally, Adebajo pointed out that the Senate lacks the authority to obtain Ways and Means advances, labelling such actions as illegal. It was stressed by him that the government should prioritize discussions with creditors to adjust debt terms and prolong deadlines.
It is necessary for Nig. to adopt short-term and long-term strategies.
Furthermore, this adjustment fostered by the discussions of the government with creditors would ultimately help the country in making debt repayments more feasible and taking advantage of reduced interest rates. It is essential for the country to learn from the defaults on external debts by Ghana, Zambia, and Ethiopia. In light of the growing number of companies relocating from Nigeria, Tilewa Adebajo underscored the critical need for a revamp of the Trade policies and investment climate of the country.
He highlighted the significance of ensuring the prioritization of trade, investment, and industrial strategies to improve and uphold economic stability. Adebajo pointed out the challenging situation that Nigeria is currently experiencing in terms of its Economy which is characterized by stagflation, marked by sluggish GDP growth, escalating debt levels, and growing fiscal deficits. To steer the economy towards sustainable growth, it is necessary for the country to adopt a mix of short-term and long-term strategies.
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Additionally, he proposed a strategy to cut Government Spending by eliminating non-essential items, ending wasteful subsidies, and improving the efficiency of public services to reduce costs. Adebajo also suggested expanding the variety of taxes imposed, enhancing Tax Collection methods, and implementing new taxes such as Value-added Tax (VAT) and property taxes in place of raising existing tax rates. Adebajo stressed the significance of transparency and accountability in the allocation of government funds, citing its role in building confidence within the community and attracting international investors.