Scary, not because the government has secured a fresh loan or about to so, but that its officials reminded the people of their aloofness to the real cost of the rising indebtedness and its correlation with other socio-economic variables.
Ghana’s debt to GDP has crossed the dreaded 70 per cent to 72 per cent with a projection that it will hit 86 per cent by 2024. The debt to GDP of Kenya, which is currently battling to reduce foreign investors’ holding in its debt portfolio, climbed to 35.6 per cent and is expected to reach 38.5 per cent at the end of the year. In Europe and elsewhere, debts to GDPs are in the neighborhood of 100 per cent. India ended the 2020/2021 financial year at 58.
Meanwhile, the total global debt stock surpassed IIF’s earlier $277 trillion projection to hit an all-time high of $281 trillion or 233 per cent, the size of the value of goods and services produced worldwide as of last year. It thus means that Nigeria’s debt to GDP, indeed, is moderate. Sadly, the mainstay of the country’s revenue is not agriculture nor manufacturing but oil, which contributes less than 10 per cent of the national output. In the same logic, agricultural activities are majorly tax-excepted, implying that the sector is not a cash cow. This suggests that sectors that drive GDP, which historically informs government’s borrowing, do not provide the liquidity needed to service debt.
Adding to this complication is the fiscal deficit which is rising at an alarming magnitude. The Federal Government recorded an all-time high fiscal deficit of N6.6 trillion last year – an equivalent of 14.2 per cent of the 2020 GDP. The amount was also N2 trillion, that is 43.2 per cent, higher than the projected N4.6 higher and 57 per cent above the 2019 deficit. The shortfall was partly-financed through domestic borrowing to the tune of N2 trillion.
Source: Loan Digest (loandigest.net)
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