Nigeria’s rising debt may lead to extra burden, say experts

ABUJA - With the increasing appetite of the nation for borrowing, experts are of the opinion that the situation must be carefully managed this year.

, EVEREST AMAEFULE writes

Nigeria’s total debt stock rose by N8tn between September 2015 and September 2017. The country’s total debt stock as of the end of September 2017 stood at N20.37tn, while the debt as of the same period in 2015 was N12.36tn.

This means that within a period of two years, the country’s total debt exposure rose by N8.1tn. In terms of percentage increase, the country’s total debt rose by 64.81 per cent within the period.

Two years before, the external loan component of the country’s total debt stood at N2.09tn. However, as of September 30, 2017, the external debt component stood at N4.6tn. This means that the external debt component rose by N2.6tn or 124.4 per cent.

The domestic debt component of the total debt, on the other hand, rose from N10.27tn by September 2015 to N15.68tn in September of the year that just rolled over.

This means that within the two-year period, the domestic debt component rose by N5.41tn. In percentage terms, the domestic debt rose by 52.68 per cent.

Although the external component of the total debt increased by a higher proportion, statistics as of September showed that domestic debt, with its high cost of servicing, still dominated the country’s borrowing pattern.

The September debt status of the nation is not the final for the year as the country continued to borrow money from both local and foreign sources.

One of the major implications of the nation’s rising debt profile is the increasing burden of interest payment. This is especially true as the country has been making less money than before as a result of falling crude oil price in the international market.

In fact, the country’s debt sustainability has become an issue of debate as some experts have argued that Nigeria’s indebtedness is no longer sustainable.

The argument is that with reduced capacity to earn money, the country’s ability to service debt and repay the principal has been impacted. This, the arguments goes, has rendered the nation’s debt unsustainable even though the total debt to Gross Domestic Product ratio is still low.