Nigeria has been advised by local think tank, the Nigerian Economic Summit Group (NESG) to consider undertaking some debt relief programmes in order to drive down its debts to sustainable levels.
NESG, in its recently published Macroeconomic Outlook of the Nigerian Economy for 2021, suggested that the continent’s biggest economy approach multilateral creditors such as the IMF and World Bank for debt reliefs.
“Nigeria needs to approach multinational creditors like International Monetary Fund (IMF), World Bank and others with a proposal for “Debt Servicing Relief”. This will help ease the country’s shrinking revenue potentials and reduce the fiscal deficit,” said NESG.
In addition to requesting for debt service relief, NESG noted that Nigeria needs to concentrate on alternative and non-debt sources for budget deficit financing.
“There is a need to consider adopting non-traditional financing mode, especially for infrastructure development. The institutionalisation of Private Public Partnership (PPP) model and the use of non-interest financing models, should be considered. These financing models are cheap, cost-effective and can help improve transparency in public procurement,” added the report.
Data released by Nigeria’s National Bureau of Statistics (NBS) indicate that the Federal Government’s total public debt stock as at September 2020 was N32.22 trillion (Ghs 492.5 billion).
A year-on-year increment of some N6.01 trillion (Ghs 91.7 billion) when compared to the N26.21 trillion (Ghs 400.7 billion) recorded in September 2019.
A breakdown of the composition of Nigeria’s public debt stock as contained in the Nigerian Domestic and Foreign Debt Report, reveal external debts accounted for 37.82 per cent (Ghs 186.3 billion) of the total debt stock with domestic debt accounting for 62.18 per cent (Ghs 306.3 billion).
On December 31, 2020, President Buhari signed the 2021 appropriation bill of N13.59 trillion (Ghs 207.7 billion) into law, which was 25.7% higher than the revised 2020 budget of N10.8 trillion (Ghs 165 billion). However, the budget comes with a deficit of N5.6 trillion (Ghs 82.7 billion), which is expected to be financed mainly through borrowings both externally and domestically.
According to Dr Zainab Ahmed, the Minister of Finance, Budget, and National Planning, in the 2021 budget presentation said N2.34 trillion (Ghs 34.5 bilion) will be sourced each from domestic and foreign sources respectively, N709.69 billion (Ghs 10.5 billion) from Multilateral/bilateral loan drawdowns, and N205.15 billion (Ghs 3 billion) from privatisation proceeds.
NESG calls for the Nigerian government to consider debt service reliefs comes as a bit of a surprise as the country has an estimated debt to GDP ratio of about 22%, one of the lowest in the world and much below what is obtainable in most emerging markets.
