Nigeria’s total external debt under the administration of Buhari is now $40bn
From $10.32 billion on June 30, 2015, to $40.06 billion as of June 30, 2022, Nigeria’s total external debt has increased.
According to the Debt Management Office’s external debt stock statistics, there has been a growth of 288.18% during the past seven years.
According to a breakdown, the federal government has $7.05 billion in external debt in 2015, compared to 36 states’ $3.27 billion.
State external debt climbed to $4.56 billion by 2022, while federal external debt reached $35.5 billion.
Loans from international institutions including the World Bank, the African Development Bank, and the International Monetary Fund were among the obligations.
Additionally, they comprised commercial financing from sources including Eurobonds and Diaspora bonds, as well as bilateral loans from China, France, Japan, Germany, and India.
As the value of the naira declined, Nigeria’s external debt increased, burdening the country with more debt and impairing its capacity to pay it back.
According to current data from the International Monetary Fund, the naira has lost 10.6% of its value yearly since 1973 at the long-term pace of devaluation.
Nigeria’s local currency unit is expected to lose further ground next year, according to the Bank of America, since its current exchange rate to the dollar is far higher than its fair value.
The central bank’s true effective exchange rate, the frequently utilised black market rate, and our own currency fair value research all indicate that the naira is 20% overvalued, the bank claimed, according to a Bloomberg story.
Over the following six to nine months, “we see potential for it to weaken by a comparable amount, putting it to as high as 520 per USD.”
Financial experts suggested that Nigeria and other West African countries move away from relying on foreign aid to the funding of regional development initiatives during a workshop on tax expenditures held by the ECOWAS Commission in Abuja.
They contend that an excessive reliance on outside loans and help might have an adverse impact on the long-term development of the entire area.
While stressing that the debt profile of the majority of the sub-regional countries was rising, Gbenga Falana, Special Advisor to the Director (Custom Union and Taxation in ECOWAS), emphasised the need for West African countries to look inward and finance local projects through effective domestic resource mobilisation.
In response, Mr. Johnson Chukwu, Managing Director/Chief Executive Officer of Cowry Asset Management Limited, stated that a high level of foreign debt would place a significant burden on the economy in the form of debt servicing.
This would put a significant economic burden on the economy on top of already poor oil sales revenues, he claimed.
The government will find it difficult to fulfil its debt service obligations to international lenders if oil sales revenue does not increase.
Nevertheless, he pointed out that Nigeria could cover its foreign debt at the current level, but a continuous rise in debt without a matching rise in foreign currency receipts might put the country in a tough situation.