Despite the negative toll the debt profile is having on the Nigerian economy, the Debt Management Office (DMO) has insisted that the nation’s debt is still sustainable as it is yet to reach the threshold set by the International Monetary Fund ((IMF) and the World Bank.
According to it, the Economic Community of West African States (ECOWAS) has set maximum debt limit for West African countries at 70 per cent of the nation’s Gross Domestic Product (GDP) and Nigeria is still currently at 21 per cent while for external debt, DMO has set 40 per cent benchmark, but the country is still at eight per cent, adding: “Currently, Nigeria’s total external debt as at December 2020 is $33.8 billion ((N12.7 trillion) of which the Federal Government owes $28.5 billion while the states owe $4.7 billion. The domestic debt is $53.04 billion, while the Federal Government’s debt was put at $42.1 billion, the states owed $10.9 billion, putting the total debt at $86 billion (N32. 9 trillion).
The representative of the DMO Director-General, Monday Usiade, disclosed this during a presentation on Nigeria’s local and foreign debt management at the West African Region – Debt Advocacy and Training Sessions in Abuja, organised by the African Network on Environment and Economic Justice (ANEEJ) in partnership with African Forum and Network on Debt and Development (AFRODAD).
He said they had provided the debt sustainability analysis using the World Bank/IMF template which they use to analyse the nation’s debt yearly and advise the government on borrowing, saying looking at Nigeria’s size of economy which is relatively large compared to other smaller countries, its debt to GDP ratio as at 2019 stood at 19 per cent and this is relatively small.
The debt only increased by 1.6 per cent in 2020, he said, adding that if benchmarked with the size of Nigeria’s economy, the country could still generate the needed revenue to service the debt.
Usiade said the DMO office had set a debt specific limit of 40 per cent even though the World Bank and the IMF are advising that we can go up to 55 per cent.
“We have said we will always ensure responsible borrowing, even at the 40 per cent threshold, Nigeria is still at 21 per cent, which is relatively low.
“Looking at all the indicators, Nigeria is not under any debt distress,” he said.
Executive Director of ANEEJ, David Ugolor, in his remarks, said if the debt issue by African countries were not properly managed, it has the potential of quietly sending thousands to early graves and throwing millions of Africans into poverty as economies of some West African countries are already showing early signs.
He pointed out that while IMF debt sustainability analysis as of February 2021 shows that the majority of countries in West Africa have remained in moderate debt distress, further analysis indicates that debt accumulation prior to the outbreak of COVID-19 outpaces the ability of growth performance to support debt servicing.
He lamented that of the 15-member states of ECOWAS, five are already faced with the heavy debt burden.