LCCI: Nigeria’s Public Debt May Hit 117% of GDP, Seeks Reduction in Cost of Public Borrowing

•Says depreciating exchange rates paint precarious situation

 Dike Onwuamaeze

The Lagos Chamber of Commerce and Industry (LCCI) yesterday stated that Nigeria is among the countries whose public debts could hit 117 per cent of their gross domestic product (GDP) if nothing drastic is done.

This followed the warning by the International Monetary Fund’s (IMF) that countries should keep their economies in order and avoid rising public debts.

The LCCI also demanded drastic actions that would reduce the value and cost of Nigeria’s public borrowing, saying that the country’s depreciating exchange rates paint a picture of a precarious macroeconomic landscape.

The LCCI stated these in a public statement it captioned: “Beyond the Forecast: Resetting Nigeria’s Economic Compass”,  issued by the Director General of the organisation, Dr. Chinyere Almona.

“In a scenario of projected global public debt reaching 117 per cent of GDP by 2027 (the highest level since World War II), Nigeria’s current debt level is close to attaining this projection if nothing drastic is done to reduce the value and cost of borrowing within the short term,” LCCI argued.

It added that in the face of fragile economic conditions in Nigeria, the country must prioritise a better-managed fiscal policy environment that drives public debt reduction, creating bigger buffers to accommodate the likely increase in defence spending pressures and trade-related shocks to the economy in the short term.

“With crude oil revenue under attack from falling prices, the government should get stricter with cutting the cost of governance within adjusted budget assumptions that reflect current realities,” it advised.

Presently, the crude oil is selling below the government’s projected $75 per barrel in the country’s 2025 budget.

Commenting on the latest IMF’s projections, Almona expressed deep concern, saying that the IMF’s concerns regarding Nigeria’s vulnerability to external shocks were not unfounded.

She said: “The country remains heavily dependent on crude oil for foreign exchange, making it susceptible to commodity price swings. The increased sovereign spread, volatile investor sentiment, and depreciating exchange rates paint a precarious macroeconomic landscape (and calls for) deeper structural reforms.

 “Chamber is also alarmed by the IMF’s inflation projection of an average of 26.5 per cent in 2025 and a surge to 37.0 per cent by 2026. Although recent policy measures, such as the unification of exchange rates and cessation of deficit financing by the Central Bank of Nigeria (CBN) are commendable, they remain insufficient in isolation.”

The LCCI, however, called on the federal government to sustain ongoing reforms in the oil and gas sector to increase crude oil production, domestic refining capacity, and reduce fuel importation, in order to enable the country to record an improved oil revenue to support its budget aspirations and projections.

“In terms of increased tax revenue, we urge the federal government to start the implementation of the recommended tax reforms, driven by a better tax administration system,” it said.

The LCCI also advised the government to focus interventions on addressing the inflationary pressures that seem not to have sufficiently abated even with the rebased computations, by investing more in infrastructure that drives the productive real sector of the economy. 

The chamber also harped on the need to review and reprioritise the 2025 budget assumptions to reflect a lower oil revenue expectation. This, it said, should also call for necessary and critical adjustments to non-essential recurrent expenditures and non-productive subsidies.

It also recommended that the government should provide incentives to empower high-growth sectors like solid minerals, the creative industry, and the digital economy in order to intensify non-oil export promotion.

It said: “We can boost agricultural production and agro-processing through targeted investments in local fertiliser production, highly subsidised extension services, tech-driven irrigation, and value chain infrastructure.

“To drive inclusive economic growth, we need to boost access to microfinance, improve and stabilise power supply, and drive regulatory reforms that support Micro, Small and Medium Enterprises (MSMEs) and local manufacturing for job creation, revenue generation, and economic growth.”