Experts investing in House Afrinvest asserted that Nigeria’s debt situation requires immediate action to prevent further deterioration.
This is pointed out in their latest macroeconomic update, titled “Nigeria’s debt statistics…high risk?” This involves the results of a recent visit by Gita Gopinath, the first deputy managing director of the IMF.
During the visit, Gopinath described Nigeria’s debt levels as moderate rather than high risk, providing some optimistic assessments of the country’s fiscal situation.
Regarding Nigeria’s debt sustainability, Gopinath said: “We (IMF) assess the country’s debt sustainability every year, and we do this for Nigeria in the 2024 report. Our assessment is that the risk of Nigeria’s sovereign pressure is moderate and not high.”
But, she warned that the IMF’s judgment was not a permit for the country to assume more debt, saying, “No, I won’t go this path. The key is that you want to stay moderate and don’t want to go into high-risk debt levels. I just want to emphasize the fact that while the country’s sovereign debt is said to be moderate, we live in a world full of shock and a lot of uncertainty.
“If you consider interest payments as a share of income, 75% of income will receive interest payments. This means that almost no money is used for social support or development expenditures. So it is also important to make more domestic income mobilization to ensure that debt remains at a manageable level.”
Gopinath also stressed that savings from fuel subsidies should be redirected to government reserves rather than spending inefficiently.
Overall, the IMF Deputy Director stressed that Nigeria needs to optimize its revenue stream by strengthening tax collection, curbing leaks and ensuring fiscal discipline.
In response to the visit, Afrinvest experts agreed with the IMF in their macroeconomic update that long-term strategies should prioritize reducing their dependence on debt and strengthen Nigeria’s fiscal position through cautious tax expenditures, increased tax collection and effective budget allocation, and within the scope of real economic growth.
“However, we believe that Nigeria’s debt situation needs immediate action to prevent further deterioration. Recall the issue 3: 2024 released by the Office of Debt Management, which shows that the total public debt, driven by the expansion of budget deficits and the adverse effects of exchange rate depreciation on foreign debt is N142.3TN (the highest nominal level ever).
“Specifically, domestic debt rose by 3.3% to N73.4TN, up 24.2% as of 9m: 2024. Local debt accounts for 51.6% of total public debt debt – a mixed domestic debt cap of 70.0% of DMO. Meanwhile, foreign debt jumped 9.2% in Q/Q to N68.9TN, reflecting an 80.2% increase, mainly due to the continued depreciation of the Naira, which decreased by 11.9% in the third quarter, averaged n1,579.22/$,” the investment company said.
Analysts noted that the total public debt-to-GDP ratio reached 52.8% (based on 9 million debt and nominal GDP), exceeding the 40.0% limit of the 2020-2023 interim debt management strategy and approaching the 55% risk threshold for developing countries.
Atiku Bagudu, Minister of Budget and Economic Planning, said of the allocation of high debt services in the 2025 budget and deficit, that continued positive economic conditions may be reduced.
Bagudu’s KPMG broadcast on Arise TV on Monday has a budget of 2025 days. He said: “With the deficit of N14TN, given that what we are seeing is an innovative approach to financing, first of all, because you didn’t turn to the central bank of Nigeria at all. So, under no circumstances will the central bank exceed the 5% statutory limit. So we will go public and we will go public in different ways. Innovative financing and innovation Method: Local bonds have been issued where the government raises funds. Of course, this represents a statement of intent, just to ensure that those who we borrow from will be confident that we have enough money to meet our debt obligations. But, as we expect, the economy will continue to improve and we may not need to spend on debt services.”
Meanwhile, Agusto & Co. Jimi Ogbobine, head of Agusto Consulting, a subsidiary of the subsidiary, asserted that the government of current President Bola Tinubu is a large-spending government and therefore concerns about the fiscal deficit have increased.
Ogbobine said at the Ratings Company 2025 Economic Roundtable: “For Nigeria, we have about 10 major uncertainties, first of all, our debt sustainability. Debt sustainability in Nigeria is a key concern for us, so we must pay attention to it. Many of us say that our political parties are not aware of it.” The form, but that’s not absolutely true. In theory, they may not have it, but actually have it. This current party is a large government party, which is why debt sustainability is a key issue. Nigeria’s fiscal responsibility law says that fiscal deficits should account for three percent of GDP. This is not the law; even if written in law, it is a guide.”
