According to a recent report by the Debt Management Office (DMO), Nigeria’s total debt stock has reached N46.25 trillion. This development raises fiscal concerns, with the International Monetary Fund warning that Nigeria almost depleted its treasury on debt servicing in 2022. Furthermore, the Nigerian government has approved another N369 billion loan from the World Bank, ahead of the fuel subsidy removal in June 2023.
The country’s debt profile has grown from N12.6 trillion in 2015 to over N46 trillion in 2023, during the Buhari administration’s eight-year term. With such a significant debt burden, the issue of debt sustainability and economic instability looms over Nigeria.
While President Buhari’s administration has left the country broke, economic experts suggested that the incoming government should seek loan renegotiation, as it is internationally practiced, if it has credibility.
However, fixing Nigeria’s debt-burdened economy will not be an easy task. Prof. Bongo Adi, a Professor of Economics at Lagos Business School, stated that the debt incurred by the Buhari administration had mortgaged the country’s future through heavy obligations.
He also highlighted that the coming days would be difficult for the Nigerian economy because the country is broke. “Medical doctors and professionals of all cadres are leaving, so who will create the money to pay back the loans? The factors that drive economic activities are fast depleting,” he added.
Dr Ayo Teriba, an economic expert and the Chief Executive Officer of Economic Associates, stated that the Buhari administration’s error was not to transition from income-based debt management into an asset-based debt management model.
He called on Nigerians to support the incoming government’s focus on equity financing rather than debt to grow the economy. According to him, the incoming government must learn from Buhari’s mistake by borrowing against assets, not income, to ensure sustainability.
He also cited Brazil and India as examples of countries that attracted Foreign Direct Investment into their economies using asset-based borrowing. “Nigeria has options: the country is blessed with a lot of assets. Instead of issuing debt, equity should be issued; I don’t see why Nigeria cannot attract equity.
Nigeria’s prospect of attracting equity is brighter than that of India and Brazil. The clarion call is for Nigerians to support the incoming government to transit to equity issuance. Nigeria’s potential of issuing equity is greater than that of debt,” he said.