Cardoso Warns Nigeria On Debt Risks

Central Bank of Nigeria (CBN) governor, Olayemi Cardoso has warned Nigeria and other developing countries to be wary of debt risks saying if left unchecked, they will hinder economic growth and prosperity.

The apex bank governor, however, said that Nigeria’s situation is stable despite the near-term risks attributed to unfavourable global market conditions and increased debt burden occasioned by the COVID-19 pandemic outbreak.

Many experts have been attributing Nigeria’s economic challenges partly to debts accrued over the years that have not translated into meaningful development.

That notwithstanding, Nigeria dedicates huge sums to servicing local and foreign debts even as leaders at national and state levels continue to borrow.

Ironically, citizens are becoming poorer by the day, especially with the removal of fuel subsidy and the massive depreciation of the naira, which have depleted the capital of many businesses and the purchasing power of the citizens.

But Cardoso said that a recent sovereign stress risk on Nigeria by the World Bank and International Monetary Fund (IMF) rated Nigeria as moderate.

He stated this in Abuja on Monday when he declared open a World Bank, IMF and West Africa Institute for Financial and Economic Management (WAIFEM) regional training on Medium Term Debt Strategy (MTDS) for Debt.

Represented by the Director of the Monetary Policy Department, Dr Mohammed Musa Tumala, he said Nigeria’s MTDS are “To ensure borrowing activities are conducted within sustainable levels, to optimise the debt portfolio for cost and risk, and to improve debt management capabilities.”

Comparing Nigeria’s case, the CBN governor said it wasn’t a pathetic one.

Nigeria is shouldering a combined debt burden (external and domestic) of N87.91trn as of the third quarter of 2023.

The Debt Management Office (DMO) in December 2023 put external debt at N31.98trn and domestic debt at N55.93trn.

Cardoso said MTDS always guided its debt management activities, the most recent being the MTDS 2020- 2023.

According to the 2024 budget, the federal government says it will spend N8.25 trillion on debt servicing. This is from the total of N27 trillion earmarked for the year.

Over the past nine years, the actual cost of debt servicing has been more than the budgeted amount.

A recent report by PwC Nigeria has said Nigeria’s rising debt service cost may affect the country’s debt servicing ability, credit rating outlook and borrowing cost.

In its 2024 Nigeria Economic Outlook report, the professional services firm projected that debt service could rise from N8.25 trillion in 2024 to N9.3 trillion in 2025 and further to N11.1 trillion in 2026.

It said the shift towards more domestic borrowing could impact the private sector, as government credit constitutes 37 per cent of net domestic credit, which saw a 28 per cent increase from January to September 2023.