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Analysis: Nigeria and The Kiss Of Debt

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Analysis: Nigeria and The Kiss Of Debt

In addition, a need to further examine the effect of government debt accumulation on private investment is vital given the prominent role investment plays in an economic activity.

These include employment opportunities, increased government revenue through company income tax and value added tax among others. Statistics shows that domestic debt accumulation account for 62 per cent of the total debt in 2018.

Domestic debt accumulation by government brings about scarcity in financial resources needed for private investors to further make investment in the economy. To this end, we say that private investment in Nigeria declined by 5 per cent between 2014 and 2018.

Correspondingly, according to NBS report, there has been a consistent rise in unemployment rate from 20.4 per cent in 2017Q4 to 23.1 per cent in 2018Q3.

Conclusively, domestic debt accumulation discourages private investment level in Nigeria through increased lending rate, inflation rate and scare resources in the financial market which further has a significant impact on the rate of employment and the economic activities of the country.

The Federal Government of Nigeria on Tuesday, February 4 sought the approval of Senate for concessionary external borrowing of $22.8 billion purposed to enhance productivity of the economy via electricity projects, railway line, roads, agriculture, grant of soft loans to small and medium scale enterprise (SMEs) among others.

Furthermore, the justification for the loan as given by the Minister for Finance; Hon (Mrs) Zainab Ahmed was that the debt-to-GDP ratio of the country is below the threshold limit of 55 per cent as recommended by IMF and IBRD. Given this proposal, it is evident the country’s least condition of debt-to-GDP ratio of 25 per cent recommended by Debt Management Office (DMO) will be violated.

To further examine the implication cost attached to this; according the 2020 budget, the recurrent debt servicing constitutes 93 per cent of the targeted oil revenue using the benchmark price of $57 per barrel. What then is the implication of this given the coronavirus incidence relative to the Nigerian economy?

Source: https://www.premiumtimesng.com/business/business-data/379862-analysis-nigeria-and-the-kiss-of-debt-2.html



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