"Nigeria Has Limited Borrowing Space": Budget Office Warns of Looming Debt Crisis
- The Budget Office has raised a red flag on Nigeria's increasing debt profile.
- Nigeria's debt woes continue to spark concerns from different quarters that have signaled a looming crisis ahead.
- Today, Nigeria has limited borrowing space due to the fact that the size of the country's debt far outsizes its revenue.
As Nigeria's economy continues to face serious challenges, a new warning from the country's budget office has raised concerns about the country’s increasing debt levels. The office cautioned that Nigeria's growing debt profile could spell trouble for the nation's economic future.
Source: UGC
According to Punch, Ben Akabueze, the Director-General of the Budget Office, sounded the alarm, cautioning against the impending troubles that may arise due to the country's rising debt levels.
Akabueze said that while Nigeria’s debt-to-GDP ratio may be safe, the debt-to-revenue ratio gives cause to worry.
He said:
PAY ATTENTION: Join Legit.ng Telegram channel! Never miss important updates!
You may have heard that we have one of the lowest Gross Domestic Products-to-debt ratios in the world. While the size of the FG budget for 2023 created some excitement, the aggregate budget of all the governments in the country amount to about N30tn. That is less than 15 per cent in terms of ratio to GDP.
Akabueze emphasised that Nigeria has limited borrowing space due to the fact that the size of the country's debt far outsizes its revenue.
He added that normally, a country should be worried when its debt service ratio exceeds 30%. Nigeria, he noted, is already spiraling towards 100% which should make concern a priority.
Just as many continue to lament Nigeria's rising debt, President Muhammadu Buhari has sent a new request to the Senate for the approval of a $800 million loan request which would be sourced from the World Bank.
In addition, the federal government is expected to spend about $23 million as consultancy fee to secure the $800 million loan.
Implications of Nigeria’s debt trend
The budget office pointed out that while the country's debt levels have risen, revenues have remained stagnant. The country's oil-dependent economy has also been hit hard by falling oil prices.
This means that Nigeria may find it increasingly difficult to meet its debt obligations, which could lead to financial instability and further economic woes.
With the country grappling with an already burdened economy, the mounting debt poses significant challenges and potential long-term repercussions
The exponential growth of Nigeria's debt threatens the nation's economic stability on multiple fronts. The increased debt servicing costs strain the already limited resources, diverting funds that could have been allocated to critical sectors such as healthcare, education, and infrastructure development.
This jeopardizes the government's ability to meet the pressing needs of its citizens and stifles the potential for sustainable economic growth.
Nigeria’s Debt Hits N49 Trillion
Legit.ng earlier reported that by the time President Muhammadu Buhari exits office on May 29, 2023, he will be leaving a mountain of debt pegged at about N49.93 trillion, covering both external and domestic debt. The amount is nearly 300% higher than the debt he met in 2015.
Nigeria’s total debt portfolio now stands at about N49.93 trillion, with the government borrowing N3.73 trillion in the last two months.
Also, Nigeria borrowed more money in 2022 than any year in the last seven years. Data indicates that the Nigerian government raised N1.599 trillion in the fourth quarter of last year.
The Debt Management Office (DMO) stated that the federal government had raised N2.129 trillion from January to March 2023.
An analysis of the debt indicates that Nigeria’s domestic debts have surged to N30,643 trillion, mainly due to new borrowings of about N1.599 trillion in Q4 of 2022 and N2.29 trillion in the first two months of 2023.
The country’s external debt went up to N18.282 trillion because of the fall of the naira.
Source: Legit.ng
