At about 100 per cent yearly growth rate, an economist and investment banker, Dr Vincent Nwani, has expressed concern about the country’s ability to sustain its debt, projecting that the debt-to-output ratio could hit 100 per cent in 2030.
The Federal Government hopes to ramp up the gross domestic product (GDP) $1 trillion in 2030, but experts balk at the possibility with a high inflation rate, currency depreciation and other challenges stalling confidence in the economy.
Nwani also noted that the sovereign debt stock has grown by about 865 per cent since 2015, from N12.6 trillion to N121.6 billion at the end of Q1 2024. He said Nigeria’s debt-to-GDP spiked from about 20 per cent in 2015 to 52.9 per cent in Q1 2024.
“From our estimate, at average annual GDP Growth of 3.5 per cent and average annual growth of debt stock at about 100 per cent, Nigeria will potentially hit a debt-to-GDP ratio of 100 per cent by 2030,” he said.
He added that what is more worrisome is the spate at which Nigeria’s external debt exploded from $10.72 billion in 2015 to $42.12 billion in Q1 2024, representing an increase of 296 per cent over the last nine years.
“Notably, Nigeria’s debt obligations to China increased by about $500 million in the first half of 2024, up to $5.66 billion. It is widely conserved within the Nigerian government circle that loans from China have created a viable alternative to increasingly sticky funding sources from the West including underlining harsh conditions associated with most multilateral loans,” he said.
Citing the experience of Greece, Zambia, Ghana and others as glaring examples of the downsides associated with a huge burden of sovereign debt and repayment defaults, he said some African countries have had to give up national assets to their creditors over the past few years due to debt defaults.
“Some African countries are beginning to decline Chinese loans due to bitter lessons learned by Zambia, Kenya, Ethiopia and a couple of other countries who are neck deep in China borrowing traps.
“However, the potential effects of debt default such as losing or confiscating vital national assets seem to be increasingly closing in on the country. Zhongshang Fucheng Industrial Investment Ltd, a Chinese company has recently given Nigeria a little bit of what China loan default looks like by aggressively seizing the country’s assets across the world in response to a contractual default valued at $70 million between the company and Ogun State, thereby causing a huge embarrassment to the country on an international scale,” he said.
Advising the country to look for other viable alternatives as it seeks to finance its developmental aspirations, he said the starting point is to embark on credible infrastructure sector reforms capable of attracting private investors from home and abroad, commit to improved fiscal discipline and transparency at all levels of government, eliminate vested interest syndrome, improve ease of doing business, and boost investors’ confidence.
