Public debt hurts citizens, says IMF
Despite the bloated recurrent spending in the 2024 budget and a significant infrastructure gap, Nigeria’s debt repayment now exceeds both recurrent and capital expenditure. This is alongside the country’s foreign direct investment (FDI) being at an all-time low of under US$1 billion.
Chief Executive Officer of The CFG Advisory, Mr Tilewa Adebajo, disclosed this yesterday while speaking on the topic ‘Nigeria’s Fiscal Environment in an Era of Monetary Policy Tightening’ at the June 2024 edition of the Finance Correspondents Association of Nigeria (FICAN) bi-monthly forum in Lagos.
Though N8.7 trillion was earmarked for capital expenditure in 2024 budget, infrastructure development will receive just N1.32 trillion.
According to Adebajo, Nigeria’s current debt burden of US$130 billion is being serviced by 95 per cent of revenues, as debt repayment now exceeds both recurrent and capital expenditure.
Nigeria’s public debt stock rose from N97.34 trillion in December 2023 to N121.67 trillion in March 2024, according to the Debt Management Office (DMO).
Also, Mark Aguiar, director, international economics section for International Monetary Fund (IMF) has said sovereign borrowing negatively impacts citizens, increases volatility and lowers investment.
In a report published on the IMF’s website, he stated that, unlike the popular belief that public debt will fund investment and support national budget deficits, countries that borrow from global sovereign debt markets experience slower growth rates than countries that don’t.
The report surveyed the debt trend of 52 developing and emerging market economies over the last 20 years, to ascertain the impact of sovereign debt on these economies, and found that countries with high debt stock tend to have slow growth rates.
“The neoclassical paradigm predicts that countries that borrow (all else equal), should have faster growth and less volatile spending. The exact opposite is what we see in the data. Countries with external public savings with their foreign reserves exceeding external debt, experienced faster growth, while those that borrowed stagnated,” the report stated.
