Experts task incoming administration on Nigeria’s rising debt profile

Economic experts have charged the incoming administration to embrace strategies aimed at tackling Nigeria’s debt overhang for economic growth and development.

They spoke at the American Business Council (ABC) Economic Update with the theme: “Nigeria’s Debt Overhang and Strategies to Create Economic Growth” on Thursday in Lagos.

The Chief Economist, KPMG, Dr Yemi Kale, said focus must be on the Consumption, Investment, Government Expenditure, Exports and Imports (CIGXM) economic indices to fully harness the potential of the country’s economy.

Kale said under the CIGXM, Nigeria must begin to boost consumer purchasing power, enhance ease of doing business, provide the right infrastructure, increase public investment and enact fund usage transparency.

He added that the country must increase export tentacles, enhance competitiveness, promote income substitution and address large debt burden and debt servicing ratio to ensure long term economic sustainability.

Kale noted that Nigeria with its strong and vast economic potential, exportable commodities, huge arable land has been unable to fully utilise these potential.

This, Kale said, was due to its dependence on oil, unforced errors, political instability, deteriorating insecurity, external shocks, Nigeria’s macroeconomic dysfunctional structure.

He said the current state of the country’s macroeconomic position was characterised by high domestic and external debt, low Foreign Direct Investment, hyper inflation, high interest rate and others.

He noted that these developments made the fiscal space constrained due to lower government revenue and rising public debt.

“Since 2013, Nigeria’s public debt has increased by almost seven folds and inflation and high debt servicing costs are factors that have raised debt levels.

“Although debt to the Gross Domestic Product (GDP) remains relatively low at less than 40 per cent, arbitrary borrowing from the Central Bank of Nigeria to cover budget deficit has undermined fiscal prudence.

“The income administration must curtail excessive borrowing by raising revenues from both oil and non-oil sources and engage in prudent budget practices.

“Nigeria must implement fiscal restraint, enhance revenue production through taxation changes, diversify the economy, and successfully control governmental expenditure to lower the debt load and foster economic growth in Nigeria,” he said.

Kale added that the top disruptive policy pronouncements to set the country on the right path include regaining confidence in the foreign and local scene, harmonisation of foreign exchange market and engaging the right economic team in the presidential cabinet.

The President, ABC, Mr Sopiribo Ideriah, said the ABC quarterly economic update was an insightful session on current economic trends that affect businesses in Nigeria and potentially threaten the private sector.

Ideriah stated that this edition would serve as a resource and advocacy instrument needed to drive the change required in the economy with priority areas for the incoming administration towards national public debt.

He noted that the country’s total public debt stock showed a 14.46 per cent increase from N39.56 trillion at Dec. 31, 2021 to N46.25 trillion at the end of December 2022 excluding debts accrued from ways and means.

“This debt situation has been a long-standing issue attributed to various factors, including declining oil revenue, fiscal allocations and inadequate diversification of the economy hindering economic growth.

“This rising debt, coupled with the elevated currency depreciation rate and Nigeria’s infrastructural deficit further impede the capacity to overcome this burden especially for the incoming government.

“There lies a need to curb inflation and address debt from a revenue-generating perspective which would engender the positive impact needed for the economic development of the nation whilst attracting investors from the G7 and foster international trade through the African Continental Free Trade Area,” he said.

Mrs Mokutima Ajileye, the Managing Director, P&G, Nigeria, said the country’s manufacturing sector needed the certainty and predictability that came with stable and long-termed government policies to increase the sector’s contribution to the GDP.

According to her, the sector is frustrated by the fact that policies keep changing, timelines for some policies are unrealistic and the foreign exchange rate are uncertain.

“The sector has not recovered from the cashless policies and there’s need to provide the needed clarity on several dynamics including the H.S code by the Nigeria Customs Service to revitalise the confidence of the manufacturers.

“The manufacturing sector needs to be able to plan business on certainties and it is important to bring industry players into the room when making policies,” she said.

Bongo Adi, Professor, Lagos Business School, said a reform in the power sector was critical and the new administration needed to bring in a technical management contract to manage the transmission of electricity to add stability to the power sector.

He urged government to incentivise human capital development and improve the standard of quality of education by ensuring that universities match curriculum to the demands of the markets.

Mr Dapo Olagunju, Managing Director, JP Morgan West Africa, said government must tackle the full chain that engage in oil theft and other loopholes in government expenditures to save additional revenue for the government.

Olagunju emphasised the need for a policy reset at the CBN to engender the unification of exchange rate.

Mr Afolabi Oladunjoye, Chief Financial Officer, ATC Nigeria, said private sector must enhance digital literacy and the future of work with particular emphasis on technological adoption via Corporate Social Responsibility.