By Dipo Olowookere
The debt-to-GDP (gross domestic product) ratio of Nigeria has slightly reduced to 19.00 per cent from 19.09 per cent within a period of 12 months, Business Post investigation has shown.
According to a document from the Budget Office sighted by Business Post, in 2019, the debt-to-GDP ratio, which measures the ability of the country to repay its debts when compared with the value of goods and services it produces, was trimmed to 19.00 per cent in 2019 from 19.09 per cent in 2018.
This newspaper gathered that in 2018, the total debt profile of the country, according to data obtained from the Debt Management Office (DMO), stood at N24.4 trillion, while the nominal GDP, as data from the National Bureau of Statistics (NBS) showed, was N127.8 trillion.
A year later, according to the debt office, the nation’s total debt profile rose to N27.4 trillion, while the nominal GDP was N144.2 trillion.
In 2017, the debt-GDP ratio of Nigeria was at 21 per cent, according to the then Minister of Finance, Mrs Kemi Adeosun, while speaking at an event in Ogun State, which took place in March 2018.
In recent times, there have been talks about the rising debt profile of Nigeria, especially under the present administration of President Muhammadu Buhari, who some observers said has a huge appetite for borrowing.
They claimed that with the present rate of borrowing, both from domestic and foreign sources, there would be a time Nigeria will not be able to payback.
One of the loans that got many people talking was the ones from China, a country most analysts said does not have mercy on loan defaulters, citing the experiences of Zambia, Djibouti and others as examples.
But the Nigerian authorities have said there’s nothing to fret about because the country, which is Africa’s largest economy and producer of crude oil, was capable of meeting its loan obligations.
Last Monday, the stats office said the country’s economy as measured by the GDP, contracted in the second quarter of 2020 by 6.10 per cent. This was in contrast to the 1.87 per cent growth achieved in the first quarter of this year.
The decline was largely attributable to significantly lower levels of both domestic and international economic activity during the quarter, which resulted from nationwide shutdown efforts aimed at containing the COVID-19 pandemic.
But the presidency has asked Nigerians not to panic over the depression suffered by the nation’s economy in the second quarter of the year, saying when compared with other better economies, the country fared better.
According to the Special Adviser to the President on Media and Publicity, Mr Femi Adesina, “It also appears muted compared to the outcomes in several other countries, including large economies such as the US (-33 per cent), UK (-20 per cent), France (-14 per cent), Germany (-10 per cent), Italy (-12.4 per cent), Canada (-12.0 per cent), Israel (-29 per cent), Japan (-8 per cent), South Africa (projection -20 per cent to -50 per cent), with the notable exception of only China (+3 per cent).”
For the debt-to-GDP ratio, the Budget Office headed by Mr Ben Akabueze, the percentage “is within the country-specific debt limit of 40 per cent and below the maximum threshold of 55 per cent recommended by the International Monetary Fund (IMF) and the World Bank for countries in Nigeria’s peer group, as well as the West African Monetary Zone Convergence threshold of 70 per cent.”
Last month, the Mission Chief and Senior Resident Representative of the IMF for Nigeria, Ms Jesmin Rahman, projected that Nigeria’s debt-to-GDP ratio may rise to 36.5 per cent in 2020 as a result of the spike in government borrowing in the short-term, describing it as worrisome and should be closely monitored.
“We project this (debt-to-GDP ratio) to increase to 36.5 per cent this year, which is a jump and then stay around 38 per cent of GDP in the medium term,” she was quoted as saying during an interview hosted by Citibank Nigeria in collaboration with the American Business Council.
