Experts point way out as Nigeria’s debts, inflation, unemployment soar

The Debt Management Office (DMO) has disclosed that Nigeria’s total public debt rose to N32.9.trillion at the end of December 2020.

Also, the nation’s inflation rate maintained an upward trend and hit a 34-month high, rising to 17.33 percent in February from 16.47 percent in January 2021, according to the latest figures published by the National Bureau of Statistics (NBS).

The N32.9 trillion Nigerian debt represents an increase of N700 billion from the public debt profile of N32.2 trillion as of the end of September last year.

The DMO also stated that the total public debt to the Gross Domestic Product was 21.61 percent, noting that it was within Nigeria’s new limit of 40 percent.

Nigeria’s total public debt as of December 31, 2020, was N32.92 trillion. The figures include the debt stock of the federal and state governments, as well as, the Federal Capital Territory.

It said that after Nigeria exited recession in 2017, the level of new borrowing at the federal level, as shown in the annual Appropriation Acts, had been declining to moderate the rate of growth in the public debt stock to ensure debt sustainability.

DMO stated that new borrowing to part-finance budget deficits had declined steadily from N2.36tn in 2017 to N2.01tn in 2018, N1.61tn in 2019, and N1.59tn in the first 2020 Appropriation Act.

This trend was reversed in 2020 due to the economic and social impact of the COVID-19 pandemic as new borrowing in the revised 2020 Appropriation Act was N4.2 trillion.

The DMO stated: “It should be noted though, that apart from the new domestic borrowing of N2.3tn, the other new borrowings were concessional loans from the International Monetary Fund ($3.34bn) and other multilateral and bilateral lenders.

“This incremental borrowing to part-finance the 2020 budget and the additional issuance of promissory notes to settle some arrears of the Federal Government of Nigeria, contributed to the increase in public debt stock.

“New domestic borrowings by state governments also contributed to the growth in the public debt stock.”

In February, the Federal Executive Council approved a new Medium-Term Debt Management Strategy for Nigeria, from 2020 to 2023, when the government disclosed it planned to increase domestic borrowings in its debt profile from 2021 to 2023.

“Borrowing will be from domestic and external sources but a larger proportion of new borrowing will be from domestic sources using long-term instruments while for external borrowing, concessional funding from multilateral and bilateral sources will be prioritized,” it stated.

Experts have cautioned against the rate at which the country is borrowing while proffering the option of cutting the cost of governance. For instance, the Managing Director/Chief Executive Officer Cowry Asset Management Ltd, Johnson Chukwu said the Federal Government’s current fiscal position constrains it from embarking on such huge expenditure as a result of accumulated large deficits over the past few years.

He said the huge debt is a burden for the economy, adding that the time had come for Nigeria to begin to seek debt relief from its creditors.

Meanwhile, the breakdown of the nation’s latest inflation figures showed that food inflation rose to 21.79 percent in February from 20.57per cent in January, while core inflation jumped to 12.38 percent in February from 11.85 percent in the previous month.

The latest spike marks the 18th consecutive month of rising inflation in Nigeria.

This rise in the food index was caused by increases in the prices of bread and cereals, potatoes, yam, and other tubers, meat, food products, fruits, vegetable, fish and oils, and fats, the report said.

The country’s inflation has been on the rise since the country shut its land borders. The situation became worse due to the coronavirus pandemic that has affected the global economy.

The borders were opened in December 2020 more than a year after closing its land frontiers to crack down on smuggling.

The economy is yet to recover from the impacts of coronavirus and the plunge in crude prices even though it unexpectedly exited recession in February.

The inflation figures are as unflattering for the Nigerian Government as were the latest unemployment figures published by NBS.

Nigeria’s unemployment rate rose to 33.3 percent in the three months through December, up from 27.1 percent in the second quarter of 2020, the last period the agency released labour-force statistics.