The World Bank Group has said that public debt in Nigeria and other low- and middle-income countries is now at a 50-year high, which is equivalent to more than 200 per cent of government revenues.
In a new report titled, “Raising the Bar on Debt Transparency,” the Washington-based bank said with the pandemic-induced economic slowdown, the impact of the war in Ukraine and the rise of interest rates, many countries were facing severe challenges in servicing their debts.
The report read in part, “Total public debt stands at an alarming 50-year high in low- and middle-income economies, the equivalent of more than 200 percent of government revenues.”
According to the World Bank’s recent International Debt Statistics 2022 report, as a result of COVID-19, the external debt burden of the world’s low-income countries rose by 12 per cent to a record $860 billion in 2020 —the fastest accumulation since World War II.
According to the report, despite the unprecedented debt burden many governments were facing, the true extent of their public debt liabilities was often hard to quantify. In fact, many low- and middle-income countries would not disclose timely debt data or at times published incomplete data that understated the true level of liabilities, the report further said.
Global surveillance was also hampered by the opacity of several domestic debt markets, the increased use of central bank repurchase agreements or currency swaps that were not included in government debt statistics and a proliferation of borrowing by state-owned and private sector entities with explicit or implicit government guarantee, it noted.
The report further said that debt transparency was critical for attaining sustainable financing and achieving macro-financial stability. It would facilitate new an high-quality investment, reduce corruption, and instill accountability, it noted.
The report stressed that comprehensive debt data would enhance the international community’s ability to help avoid debt crises or support countries when they occurred.
“ ‘Raising the Bar on Debt Data Transparency’ was the subject of a recent panel discussion, co-hosted by the World Bank Group Chief Economist and the Executive Director for Japan at the World Bank. The event brought together a panel of experts from borrower and creditor countries, academia, and the World Bank, who discussed ongoing efforts and concrete actions to support debt data transparency,” it said.
A Professor of Economics at the Olabisi Onabanjo University, Sheriffdeen Tella, in an exclusive chat with our correspondent, said government’s penchant for taking poor economic decisions had led to Nigeria’s current debt woes.
“We have talked about it all the while. We have spoken that we should slow down on these debts, but the government doesn’t seem to care. They are looking at debt-to-GDP ratio. This is not appropriate because even the GDP that we are talking about, are we sure of the figure? What we should be looking at is not debt-to-GDP, but revenue.”
He advised government to explore better means of generating revenue, as continuous recourse to taxation was not the solution to fixing the situation.
Speaking in an exclusive interview with our correspondent, the Deputy President of the Lagos Chamber of Commerce and Industry, Dr Gabriel Idahosa, said the incoming administration would inherit “a very challenging situation.”
He said, “Essentially, our debt service is almost equal to our revenue. At some point, it was about 96 per cent of our revenue. So, really, we are borrowing to fund the government. Almost all our revenue is going into servicing debts. That’s what the numbers are looking like right now. At the beginning of the year, the estimate was that about 80 per cent of our revenue will go into debt service.
“If you look at revenue generated and debt serviced, they are almost equal. It means that everything we generate is actually going into servicing debts. That’s the situation we find ourselves and it’s going to continue unfortunately because the fuel subsidy estimate of N4trn this year, with the continuous rise in the price of crude oil, fuel subsidy could take as much as N6trn.”