By Samuel Edu
Mixed reactions have trailed Nigeria’s projected debt profile of N77 Trillion, as economic experts say more borrowings will be disastrous to the country’s economic stability.
Nigeria’s Debt Management Office (DMO) in January said the next administration will inherit a public debt of N77 trillion if the N23 trillion loan from the Central Bank of Nigeria (CBN) are securitised.
Nigeria’s public debt stock stood at N44.06 trillion ($101.91 billion) in the third quarter of 2022, the National Bureau of Statistics has said.
While some experts were of the opinion that the country can still borrow as long as the funds are used for capital intensive projects, others said debt is no longer sustainable, hence borrowing more could be disastrous to the country’s economic stability.
They argued that though Nigeria is highly indebted, its level of accumulated debt is incomparable with some other world leading economy, but the debt profile is still within the benchmark of the International Monetary Fund (IMF) and world bank.
Those who spoke with The Hope include; Dr Bayo Fasunwon ,Ass Professor, political economist, Adekunle Ajasin University Akungba Akoko, Dr Akintoye Adejumo, Dr. Adebayo Adedokun both from the department of economics, Obafemi Awolowo University, Ile-Ife
Others include; Dr Egbetunde Tajudeen and Dr Adewole Musiliu both from the Department Of Economics, Federal University of Technology Akure.
Dr Bayo Fasunwon was of the opinion that “there are three factors to be considered when it comes to national borrowing, the first is the purpose of the borrowing, the second factor is the expected outcome of that purpose and the third is the capacity of the nation to produce in order to pay back within the specified time.
“If we look at these three factors and Nigeria’s debt as it is now in comparison to our GDP, we can still say our debt as a nation is not alarming.
“Nations of the world, even the richest nation borrow but for Nigeria at the moment, it is not the right time to borrow. The National Assembly should not hesitate to turn down any agenda from Buhari to borrow.
“If at all there is need to borrow, let the incoming administration come up with their proposal and programmes and then the National Assembly can consider it because any money borrowed now will to be looted and used as monument for those who are not going to be in power anymore.”
Dr Akintoye Adejumo said “Nigeria’s debt profile sounds alarming to non expert in Economics. Generally people are afraid of high debt profile but there are indices and indicators that tell us whether we are going beyond the optimal level of debt for the economy or we are within the optimal bound which is still beneficial to the economy.
“Usually for debt to be beneficial to the economy, it should be such that debt to GDP ratio gives us a value less than 60 percent that is, 0.6 in decimal terms.
“Financial analysts estimated that when it is around 55 percent, it is still good. Against this background, if we examine the debt to GDP ratio of Nigeria in the year 2020 it was 44.4 percent, in 2021 it was about 37 percent of the GDP, it was also around 37 percent in 2022 and the estimated debt to GDP ratio in 2023 is around 38.6 percent.
“So with the current debt of Nigeria standing at about N54trn, we can see that the debt to GDP ratio is still below the 60 percent benchmark.”
Dr. Adebayo Adedokun was of the opinion that “nobody is willing to have too much debt on their necks. As economists, we do not look at the size of debt in absolute term because there is no country in the world that is as indebted as the United States of America and I have never heard anybody shouting about the level of their debt.
“If a country is borrowing money and using the money for self repayment project known as self liquidated projects meaning, the money is invested in infrastructure that will generate sufficient economic value to pay the debt as and at when due, then such loan is not a problem. This is a sustainable debt.
“Nigeria owing debt is not really an issue, the question we should ask is what are the loans borrowed so far used for? If the loans borrowed so far have been well invested, we will not say they have done bad.
Dr Egbetunde Tajudeen said “debt profile of Nigeria is insignificant if the loans obtained was used judiciously but if the loans that accumulated to this amount of debt was diverted or embezzled, then there is a great problem.
Also, according to Dr Adewole Musiliu, “what is making Nigeria’s debt unsustainable is because we have revenue problem. The last time I checked our revenue GDP ratio was around five percent and that is even low by African standard.
“The problem is that government has too many leakages, the debt problem would not have been this serious if the government can work on the leakages, we have more of revenue crisis than that of debt s and the former is amplifying the later.”