By Barnabas Esiet.
Tilewa Adebajo, Chief Executive Officer (CEO) of The CFG Advisory has painted a gloomy picture of Nigeria’s current debt burden of about US$130 billion, declaring that this is unsustainable.
Adebayo raised the concern on Thursday at an interactive forum organised by the Finance Correspondents Association of Nigeria (FICAN) in Lagos.
He highlighted that the the current debt stock is draining 95 percent of the country’s annual revenues in interest servicing alone while the actual debt repayment now exceeds the provisions for both county’s annual recurrent and capital expenditures.
“Nigeria’s debt levels are now clearly unsustainable. Add to this US$10 billion from the 2024 budget deficit, and the question begs: is Nigeria heading for the default direction of Ghana, Zambia, and Ethiopia?
“The discussion on restructuring both domestic and external debt must commence alongside the ongoing economic reforms and revenue drive to avoid Paris and London Club imposition,” he stated.
According to the Debt Management Office (DMO), Nigeria’s public debt stock increased to N121.67 trillion in March 2024 compared to N97.34 trillion recorded in December 2023.
Following the bloated recurrent spending in the 2024 budget and a significant infrastructure gap, Nigeria’s debt repayment now reaches new dangerous height even as the country’s Foreign Direct Investment (FDI) is at an all-time low of under US$1 billion.
Adebajo decried the current state of Nigeria’s economy still in stagflation despite ongoing reforms aimed at achieving a sustainable growth trajectory.
He however, expressed the believe that despite the significant infrastructure deficit and growth challenges, Nigeria can still become the third largest economy in Africa, behind South Africa and Egypt.
He mentioned that the introduction of the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the removal of fuel subsidies has seen the federation account increase by 130 percent from May to November 2023 to over N1 trillion.
Adebayo further observed that while the fundamentals of the Nigerian economy remain sound, poor economic leadership in the past failed to leverage the potential to grow the economy.
“With a new and highly rated economic management team in place, expectations are high. The success or failure of our business projections and economy will depend on their commitment and sincerity to implement and deliver on their reform policies.
“The goal is to drive our economy out of stagflation and attain sustainable GDP growth targets,” he stated.
On the way out of the woods for the country’s economy, the CFG Advisory boss suggested negotiating with Nigeria’s creditors to restructure and extend the maturity tenures of debt, allowing for more manageable repayments schedules and reduced interest rates.
He urged the government to exercise fiscal discipline by reducing non-essential government spending, eliminating wasteful subsidies, and improving the efficiency of public services.
In his words, “Expand the tax base, improve tax collection, and introduce new sources of revenue, such as value-added tax (VAT) and property taxes. Improve transparency and accountability in government spending to build public trust and attract foreign investment.
‘The central bank should continue to employ tight monetary policy to combat inflation, which is often associated with stagflation.
“Maintain positive real interest rates to attract foreign investment and encourage savings. Maintain a competitive exchange rate to stimulate exports and reduce reliance on imports.
“Collaborate with regional and international organizations to access financial assistance, expertise, and market opportunities. Engage with the public, businesses, and civil society to gain their support for economic reforms.”
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