Nigeria will face a higher percentage of debt to gross domestic product (GDP) burden in the coming year, according to the International Monetary Fund (IMF).
IMF gave the projection in its October 2023 report on ‘Africa: Special Issue: In Pursuit of Stronger Growth and Resilience.’
It indicated that Nigeria’s government debt would rise by 4.3 per cent of its GDP in 2024 from 38.8 per cent in 2023.
Nigeria’s government debt to GDP has risen consistently from 21.9 per cent in 2019 to 34.5 per cent in the Covid year, to 36.5 per cent in 2021 and 39.6 per cent in 2022.
Still emerging from the COVID-19 pandemic, a sluggish global economy, worldwide inflation, high borrowing costs, and a cost-of-living crisis have hit Nigeria and other countries in sub-Saharan Africa.
Inflation is still too high, borrowing costs are still elevated, and exchange-rate pressures persist, even as political instability remains an ongoing concern.
The IMF report also projected that Nigeria’s real GDP would slightly grow from 2.9 per cent this year to 3.1 per cent in 2024.
Nigeria’s real GDP, an inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year, is expected to reach $489.80 billion by the end of 2023 and to peak around $504.99 billion in 2024.
Arising from the debt burden Nigeria and other low-income countries are carrying, the G-24, a group made up of 38 members plus China, had said not only were there high and increasing public debt levels with many developing countries but also that the countries carried unsustainable debt burdens, The ICIR reported.
The group, however, urged the Bretton Woods Institutions (BWI) to provide a durable debt resolution and a variety of steps to increase financing availability to developing countries.
In its latest ‘Nigeria’s Total Public Debt Portfolio’ report, the Debt Management Office (DMO) stated that Nigeria’s debt stock had risen to N87.38 trillion at the end of the second quarter of this year, which represents a total external debt of N33.25 trillion, and N54.13 trillion total internal debt.
The country’s inflation has also worsened to 25.80 per cent as business activity continues to experience a slowdown due to rising input costs, food prices and transport fares.
Economy to rebound despite debt and inflation challenges
There is hope the economy will rebound despite the growing debt and inflationary spike, according to the IMF.
The institution had projected growth in Nigeria’s real GDP to 3.1 per cent in 2024 and four per cent in sub-Saharan Africa; however, urging the region to take some precautionary measures.
“To ensure that the coming rebound is more than just a transitory glimpse of sunshine, it is important for authorities to guard against a premature relaxation of stabilisation policies while also focusing on reforms to both claw back lost ground from the four-year crisis and also to create new space to address the region’s pressing development needs,” IMF said.
Also, at a press briefing at the launch of the department’s latest Regional Economic Outlook, the IMF’s African Department director, Abebe Aemro Selassie, said the growth is expected to be broad-based, indicating that outcomes are encouraging given strong external headwinds.
Selassie held the press briefing on the sideline of the ongoing IMF’s annual meeting, which started Monday, October 9, and will run through Sunday, October 15, in Marrakech, Morocco.
He urged African governments to focus on four policy priorities: addressing inflation, reducing debt vulnerabilities, allowing exchange rates to depreciate where needed, and investing in priority areas like health, education and infrastructure.
“Our region is home to a fast-growing and highly creative population. We must invest in them now to allow them to reach their full potential and make this 21st century the African century,” Selassie said.
Source: ICIR
