World Bank echoes Peter Obi’s concern about debt servicing

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By Olalekan Fakoyejo

In 2023, Nigeria’s debt servicing will gulp 123.4 per cent of Federal Government’s revenue, the World Bank’s Lead Economist for Nigeria, Alex Sienaert, has projected, expressing the same concern as was raised by Labour Party presidential candidate, Peter Obi. Sienaert made it known in a presentation titled ‘Nigeria Public Finance Review: Fiscal Adjustment for Better and Sustainable Development Results’ for the month of November.

World Bank also revised its debt servicing projection for 2022, stating that 100.2 per cent of Federal Government revenue would be gulped by debt servicing. This is below the 102.3 per cent previously projected for the end of 2022 in the World Bank’s Africa’s Pulse report, which is a biannual analysis of the near-term macroeconomic outlook for the region. The report which was published in April and October during the World Bank/IMF Spring and Annual meetings had raised concerns about Nigeria’s public debt.

Nigeria’s total debt stock rose to N44.06 trillion as of September 2022, according to the Debt Management Office (DMO), from N39.56 trillion at the end of last year. In his presentation, Sienaert said debt servicing would not give room for productive spending, so borrowing was not the solution to Nigeria’s problem. “Borrowing more is not the solution: debt costs are rising rapidly, squeezing non-interest spending,” he said, adding, “Debt servicing has surged over the past decade and is expected to continue increasing over the medium-term, crowding out productive spending.”

FG has significantly increased its borrowings, as the World Bank had revealed that in 2021, $9 billion was obtained from International Monetary Fund (IMF) credit and Special Drawing Rights (SDR), against $2.58 billion in 2010.

Also, the World Bank, in a report on ‘poorest countries eligible to borrow from the World Bank’s International Development Association (IDA)’ had stated that Nigeria and other low and middle-income economies were already at high risk of debt distress or already in distress.

Apart from the World Bank, Obi, who is the Presidential candidate of Labour Party, had observed that the FG was spending beyond its revenue, stating in his manifesto that 116 per cent of government revenue was disbursed on debt servicing.

Obi noted that debt servicing overshooting revenue come at a period tax contributions to gross domestic product (GDP) fall below Africa’s average ratio. Nigeria’s tax to GDP ratio is 6 per cent, falling short of the African average of 17 per cent.

According to the former Anambra governor, Nigeria’s debt-servicing ratio and debt to revenue ratio will drastically reduce if he’s elected as President in 2023 Presidential election, as his administration will implement radical economic policies.

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