Nigeria heading towards debt overhang – NECA

The Nigeria Employers Consultative Association, NECA, has admonished the federal government to implement policies to manage its debt, as the country may be heading towards a debt overhang with debt service to revenue ratio reaching 115% in 2022.

The association issued the counsel during its 66th Annual General Meeting, AGM, held in Lagos.

The President of NECA, Taiwo Adeniyi, stated that according to the Debt Management Office, Nigeria’s public debt has risen astronomically in recent years, reaching N46.25 trillion in December 2022; with total external debt stock stood at $41.7 billion, and domestic debt stock was N27.55 trillion.

Such continuous high debts, according to him, would discourage the inflow of foreign investment, which may dampen domestic investments.

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He said, “Government would need to implement policies to manage its debt, such as widening its fiscal net through incentives that would encourage voluntary tax remittances; block leakages in governance; privatise or sell off government-owned abandoned and non-performing assets.”

Adeniyi also commended the Bola Tinubu-led administration on the recent move towards the unification of the multiple exchange rates, which he described as a positive move for private sector development. He added that the policy is expected to reconfigure the foreign exchange management system, foster price discovery and instill confidence in the foreign exchange market.

He said, “According to the National Bureau of Statistics (NBS), annual average inflation settled at 21.47% 2022, up from 15.63% recorded in 2021. 

“Since the beginning of 2023, inflation has continued to accelerate, reaching 22.22% in April and 22.41% in May 2023, according to NBS.

“High inflation rate such as we currently have in the economy has tendency to erode consumer real income and effective demand, shrink the working capital of businesses due to increased cost, deter business expansion, reduce business confidence and discourage potential investments.

“It is therefore important that the government sustains and continues to fine-tune the policy to ensure a convergence that will be business-centric.”

He further urged the FG, through relevant agencies and institutions, to intensify efforts in implementing programmes that encourage apprenticeship, technical and vocational skills as well as entrepreneurship development, in order to combat the rising rate of unemployment.