Agbaje Raises the Alarm over Looming Fiscal Challenge

  • Says Nigeria’s foreign debt stock back to pre-2005 levels

By Ndubuisi Francis in Abuja

An economist, Mr. Opeyemi Agbaje, has raised the alarm over what he described as a looming fiscal challenge, saying the country’s current debt profile, particularly the foreign component, portends a looming fiscal challenge to the economy.

Agbaje, who backed his position with graphic data from the National Bureau of Statistics (NBS), noted that Nigeria’s foreign debt stock has returned to the pre-2005 levels.

The last figures from the Debt Management Office (DMO) indicated that Nigeria’s foreign debt stood at over $15 billion.

Speaking at a media parley organised by the First City Monument Bank (FCMB) Plc in Abuja, Agbaje whose presentation was on ‘The Nigerian Economy and Financial Sector in 2018,’ also lamented that naira debt has equally quadrupled.

He noted that with the 2019 general election ahead, the debt situation would worsen, adding that although the economy exited from the recession it slipped into in the second quarter of 2016, the recent growth was oil-based rather than broad-based.

Agbaje, who is the Chief Executive Officer of RTC Advisory Services Limited, stated that the diffusion effect of the GDP growth arising from oil may manifest in 2018.

According to him, a major flaw in the government way of doing things was the adoption of a debt-led strategy rather than one that is investment-led.

He regretted that resort by the country’s economic managers to debt-led strategy turn out sub-optimal results.

Agbaje noted that such sub-optimal choices were direct consequences of pandering to political considerations.

He also blamed the high poverty rate in the country to the country’s budget structure, adding that until the structure is reversed, the poverty index would remain unchanged.

Explaining why the high poverty level is a function of the budget structure, Agbaje observed that about 75 per cent of annual budgets is reserved for recurrent expenditure.

Such recurrent expenditure, he noted, only services just about three million public/civil servants, leaving just 25 per cent of the budget for the rest of the population who are not in the public service.

He argued that as long as the extant structure is unchanged, the high poverty level in the country would subsist.

On the current economic situation in the country, Agbaje noted that the economy has benefited from the rising oil prices in the international market as well as high production occasioned by the prevailing peace in the Niger Delta.

“The Nigerian economy has benefited from rising oil prices and higher production and several macroeconomic indicators are trending positively,” he said, noting that there are however sufficient negatives including persistent low manufacturing performance, sharply rising unemployment, high inflation and fuel subsidy conundrum.

He also pointed out that political risks have begun to rise with the forthcoming general elections.