….Exceeds Recurrent, Capital Expenditure

June 27, 2024

By Kelechukwu Mgboji, Lagos

(INVESTADVOCATE)-Nigeria’s debt repayment burden has taken a turn for the worst signalling default dangers in the nearest future.

While the sum of N8.7 trillion was set aside for capital expenditure in the 2024 budget, meager sum N1.32 trillion is for infrastructure development. But the debt repayment sum is higher than both Recurrent and Capital Expenditure combined.

According to Mr. Tilewa Adebajo, Chief Executive Officer, The CFG Advisory , 95 percent of revenue generated by the Bola Tinubu led government goes into servicing of US$130 billion debt burden l, a grave situation he described as unsustainable.
To make matters worse, the country’s Foreign Direct Investment (FDI) has dropped sharply to a record low of under US$1 billion only.

Explaining the country’s grave economic indicators at the July 2024 edition of Finance Correspondents Association of Nigeria (FICAN) bi-monthly forum in Lagos, The CFG Advisory CEO disclosed that the public debt stock of Africa’s most populous nation rose from N97.34 trillion in December 2023 to N121.67 trillion in March 2024, citing the Debt Management Office (DMO) records.

He said: “Nigeria’s debt levels are now clearly unsustainable. Add to this US$10 billion from the 2024 budget deficit, and the question begs: is Nigeria heading for the default direction of Ghana, Zambia, and Ethiopia? The discussion on restructuring both domestic and external debt must commence alongside the ongoing economic reforms and revenue drive to avoid Paris and London Club imposition,” he warned.

Adebajo who spoke on the topic: “Nigeria’s Fiscal Environment in an Era of Monetary Policy Tightening,” lamented that the economy has remained in stagflation despite ongoing reforms aiming to achieve some growth trajectory.

Citing grave situation of the economy, he said “GDP growth of 3 percent is not sustainable for our population of 200 million; Nigeria requires 8-10 percent GDP growth for sustainability; 135 million Nigerians are in the poverty trap, with 40 percent unemployment and very low job creation and industrial productivity. Dwindling reserves and increasing credit default swap premiums have resulted in Caa1 junk bond rating status for our international credit ratings,” the finance and economic expert stated.

“FDI is at an all-time low of under US$1 billion; power transmission and distribution infrastructure are still very poor, impacting industry and economic growth; the macroeconomic situation has declined over the last 7 years with a loss of US$180-200 billion in GDP, currently at US$390 billion.

However, the economic expert believes that while the fundamentals of the Nigerian economy remain sound, poor economic leadership has been her major bane.