Much Ado About Nothing?

Nigeria’s debt situation has been wrongly emphasized as distressed when it is not yet an extreme cause for concern.

Written by Somkele Awa-Kalu

Jun 29, 2022

Photography by Robin Hammond / Panos Pictures

For some time now, economists have been debating the sustainability of Nigeria’s debt. Between 2015 and the first quarter of 2021, Nigeria’s total debt increased by 230 per cent from N12.6 trillion to N41.6 trillion. This debt collectively reflects the domestic and external borrowings of the Nigerian government, our 36 states and Abuja. According to the IMF’s 2022 macro stress test, by 2026, Nigeria might spend 100 per cent of its revenue on servicing debt. To critics such as Dr Azubuike Nkala of the Orient Daily, the government’s continued borrowing is irresponsible and Nigeria needs alternative solutions other than debt for funding its economic plans.

Nigeria’s policymakers, however, have been defending their borrowing practices and explaining their necessity. At the public presentation and breakdown of the 2022 appropriation bill in October 2021, the Minister of Finance, Budget and National Planning, Zainab Ahmed, stated that borrowings were instrumental to Nigeria’s exit from recession. Considering the considerable growth in Nigeria’s debt over the past six years, the question of whether our debt situation is sustainable is more than justified.

Thinking about Nigeria’s debt, there are at least three things to consider, which this piece will touch on. First, Nigeria’s growing debt is the result of a revenue problem. Second, the proceeds from debt have mostly been put to good use and, as long as plans to improve revenue and curtail expenditures are followed through, Nigeria is well placed to meet its repayment obligations. Already, the government has increased its focus on improving non-oil revenues and strengthening fiscal management. As such, the third aspect is that Nigeria’s debt situation has been wrongly emphasized as distressed when it is not yet an extreme cause for concern.

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About the Author

Somkele Awa-Kalu

is an economist currently working in the Nigerian presidency as a special assistant on Economic Research and Data Analytics. He has interests in macroeconomics, development economics and behavioural economics.

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Much Ado About Nothing?