Nigeria’s Debt-to-GDP Ratio Crosses 50% for the First Time: What You Need to Know
The recent news of Nigeria’s debt-to-GDP ratio crossing 50% for the first time ever has sparked concerns about the country’s economic stability and borrowing capacity. With a public debt portfolio of N121 trillion, consisting of both domestic and foreign debt, Nigeria’s debt levels have been steadily rising over the past few years.
The country’s nominal GDP figures have also been fluctuating, with the latest figures showing a nominal GDP of N58.5 trillion in the first quarter of 2024. This has led to a debt-to-GDP ratio of 52.9%, marking a significant milestone for Nigeria.
In comparison to other African countries like Ghana, South Africa, Kenya, and Egypt, Nigeria’s debt-to-GDP ratio has been relatively lower. However, the challenge lies in the country’s ability to meet its debt service obligations, especially with a high debt service-to-revenue ratio.
Under the Buhari administration, Nigeria’s public debt has risen significantly, from N12.6 trillion in 2015 to N97.3 trillion in 2023. The recent increase in debt has been attributed to a combination of fresh borrowing and naira devaluation.
Moody’s, a global ratings agency, has warned that Nigeria’s interest spending on debt could consume up to 36% of the federal government’s revenue in 2024. This is due to the hawkish monetary policy stance of the Central Bank of Nigeria, which has pushed interest rates for local borrowing to around 19%.
Overall, Nigeria’s rising debt profile and increasing debt-to-GDP ratio highlight the need for the government to address its economic challenges and find sustainable solutions to manage its debt levels effectively. As the country navigates through these financial hurdles, it will be crucial to prioritize fiscal responsibility and prudent financial management to ensure long-term economic stability.
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