Nigeria’s debt burden has increased by nearly N4trillion in the past six months, with potentials of hurting the chances of securing the much-needed foreign loans for implementing 2016 budget.
According to the Debt Management Office (DMO) data on the country’s debt released on Tuesday, Nigeria’s debt profile rose from N12.6 trillion at the end of 2015 to N16.3 trillion as at June 30, 2016.
The country’s total external debt stock, owed by states and the federal government, stood at N3.19 trillion by June 30, while domestic debt incurred by the federal government stood at N10.61 trillion.
Domestic debts taken by state governments stood at N2.5trillion, as Lagos, Delta, Cross River, and the Federal Capital Territory top the debtors list.
The rise in debt is not necessarily due to more borrowings, but due to the weakness of the naira against the dollar. In fact, the debt, in dollar terms, has declined from $65.43 billion in 2015 to $61.45 billion in 2016, TheCable reported.
As at the end of 2015, Nigeria’s debt, in dollar terms, stood at 13.02 percent of the country’s gross domestic product (GDP). In 2016, however, the debt-to-GDP ratio has risen to 16.83 percent, based on 2015 GDP figures.
Considering a contraction of the economy and the change in dollar to naira, Nigeria’s GDP is seen to have declined dramatically over the past two quarters.
While speaking to All Progressives Congress (APC) governors in August, a former Central Bank governor, Charles Soludo, had said Nigeria’s GDP stood at $296 billion.
Going by Soludo’s figures, the new debt-to-GDP ratio stands at 20.7 percent in 2016.
A rising debt profile may not be a problem if the economy produces enough to service existing loans as seen in the US and Japan, where debt often equals GDP.
However, the current rise in Nigeria’s debt profile, current recession, and many downgrade in credit ratings may culminate in hurting the country’s chances of securing a foreign loan.