Nigeria’s outgoing government, headed by President Muhammadu Buhari, will leave Africa’s largest economy in a deep fiscal mess that would require immediate drastic actions on the part of the incoming government.
Analysts say Buhari’s government has been riddled with corruption and incompetence, triggering an emergency in Nigeria’s economy – seemingly, a time bomb waiting to explode disastrously if nothing significant is done to address the fiscal crisis.
Nigeria’s figures in terms of revenue generation and exports have been on the decline while borrowing, public debt, and domestic debt have all ballooned in the last 8 years.
There have been questions about how the present government spent some of the funds it either borrowed or generated. The huge disparity between Nigeria’s revenue and infrastructural development is noticeable.
Yet, government officials in Buhari’s political circle have continued to make excuses, maintaining that Nigeria has no cause to worry about the accruing debts, arguing that borrowing remains a tool adopted globally to build economies.
Nigeria’s Debt
Nigeria’s debt is worrisome and has attracted lots of global attention, especially from the World Bank and the International Monetary Fund. They have issued a series of statements condemning the impending economic woes that awaits Nigeria if she continues to borrow.
According to the Minister of Finance, Budget, and National Planning, Mrs. Zainab Ahmed, 80.6 percent of Nigeria’s revenue was spent on debt servicing in 2022. This is in contrast to the World Bank’s statement, which noted that Nigeria spent 96.3 percent of its revenue on debt servicing in 2022.
The Debt Management Office (DMO), in its fourth quarter report of 2022, said Nigeria’s total debt hovers around N46.25 trillion.
Specifically, the total domestic debt stock was N27.55 trillion, while the external debt stock was N18.70 trillion (USD 41.69 billion) as of December 2022.
External debt as of May 2015 stood at $7.3 billion when Buhari took over.
Foreign Reserves
Nigeria’s sources of foreign exchange remain weak due to sub-optimal oil production induced by oil theft, as well as global monetary tightening and exchange rate rates at the parallel market.
President Buhari inherited a foreign reserve of $28.6 billion, according to official data still present on the website of the Central Bank of Nigeria. The story is the opposite today with recurring declines.
“The official foreign exchange receipt from crude oil sales into our official reserves has dried up steadily from above $3.0 billion monthly in 2014 to an absolute zero dollars today,” the CBN Governor said at the 57th annual bankers’ lecture organized by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos.
There are also arguments that Nigeria’s fluctuating forex reserves position and currency crisis were directly due to the CBN’s currency management stance.
Nigeria’s foreign exchange reserves over the past four months (January–April 2023) have dropped by $1.82 billion.
Gross Domestic Product
Jonathan’s administration handed over a $550 billion economy to President Buhari. Today, Nigeria’s GDP is $441 billion and is expected to reach $454.05 billion by the end of 2023, according to Trading Economics global macro models and analysts’ expectations.
Inflation and Exchange Rate
The past administration left behind an economy with a stable currency, where the Naira exchanged from ₦199 to $1, and Nigeria had a 9 percent inflation rate. However, after almost 8 years of the current administration, the headline inflation rate is 22.04 percent, while the exchange rate today is over N450 to $1.
Further, inflation is projected to slow gradually in 2023 as pressures ease from the factors that have caused demand to grow more rapidly than supply in recent years.
CBN Ways and Means
The Federal Government’s debt to the CBN has grown significantly in recent years as a result of the Buhari administration’s borrowing binge, which was partially motivated by the need to pay for an overextended public sector.
According to data from the apex bank, CBN loans to the federal government increased to N22.07 trillion in August from N20.61 trillion in July of last year.
The bank’s loan was N856 billion as of December 2015, N2.2 trillion as of December 2016, and N3.3 trillion as of December 2017.
The amount increased to N5.4 trillion by December 2018 and N8.7 trillion by December 2019. By December 2020 and December 2021, the total would be N13.1 trillion and N17.4 trillion, respectively. Today, it is N23.8 trillion.
Unemployment and Poverty
Under President Jonathan, the unemployment rate stood at 7.5 percent. Today, the National Bureau of Statistics, said the figures are 37.7 percent and projected to hit 40.6%, according to KPMG.
At the time, the unemployment rate stood at 7.5 percent. Today, the National Bureau of Statistics, said the figures are 37.7 and projected to hit 40.6%, according to KPMG.
Today, 63 percent of people living in Nigeria (133 million people) are multidimensionally poor. This is largely contrary to what Buhari inherited. Nigeria’s poverty rate was 32 percent as of May 2015.
According to the World Bank, poverty reduction has stagnated since 2015, and it is projected that the number of poor Nigerians will hit 95.1 million in 2022.
Covid-19
The Nigerian government has always been on the defensive, using COVID-19 as a tool. While the pandemic cannot cover up the high level of incompetence and corruption, it’s critical to know that globally, economies were shut down, triggering a few countries like Nigeria to slip into recession.
Numerous businesses were impacted by the epidemic, which resulted in their closure and staff layoffs. The nation’s unemployment rate reached an all-time high at 33.3 percent, according to figures from the National Bureau of Statistics (NBS), but KPMG is predicting that the crisis will rise further to 40.6 percent in 2023!
From every indication, a fiscal crisis awaits Nigeria as President Buhari is set to leave us. Will the incoming administration be able to provide the shock absorber and put the economy on a growth trajectory…only time will tell.
