NIgeria and other developing countries’ debt problem was casting a shadow over future growth prospects, the head of the International Monetary Fund, Chirstine Lagarde said recently while addressing financial leaders from some developing countries said that global debt had soared to 220 per cent of global output, a staggering level that did not bode well for member economies.
“This is a potential risk that is looming on the horizon of the otherwise quite sunny sky of the global economy,” she said.
Meanwhile Nigerian government debt rose to N21.3 trillion as at December 2017.
That’s a huge, intimidating number on the face of it, but according to the head of the Debt Management Office,DMO, Patience Oniha, it’s also not a serious issue, even as the International Monetary Fund on Monday expressed concern over Nigeria’s capacity to repay its rising debts.
” Without borrowing, we won’t be able to deliver on the budget and I think we should be clear about that and a lot of that went into capital projects, said Oniha at the Spring 2018 Issue of the Regional Economic Outlook for Sub-Saharan Africa.
“We are still borrowing because there are provisions for borrowing in the budget. But in terms of how much it cost us to borrow, we are working actively on reducing that and reducing the refinancing risk that we had with Treasury bills every 90 days, every six months.”
“What are we doing on debt service? The new debt management strategy, which we started implementing last year, seeks to moderate the growth of interest expense by shifting some of the borrowing externally.
Meanwhile, IMF officials have warned the government that Nigeria has been sliding down towards debt trap.
Speaking at a press conference on the sidelines of the World Bank Group Spring Meetings in Washington DC, Mrs Catherine Pattillo, Assistant Director, Fiscal Affairs Department, IMF, described Nigeria’s debt to revenue ratio, which she put at 63 percent, as “extremely high.”
In her general appraisal of the debt profile she stated: “Borrowing by countries can create benefits if used for investments of high returns. Our evidence suggests that’s not the case in some countries, especially in Nigeria. So rising debt can create the vulnerabilities.
Financial experts said that Nigeria’s debt situation demands critical attention as the country was taking loans to build infrastructures and repay interest on increasing debt. They stressed the need for improving taxation system as main source of revenue generation. An effective taxation system would help reduce the debt dependency, they argued.