Nigeria’s debt likely to rise against low revenue
By Jeph Ajobaju, Chief Copy Editor
Nigeria’s debt may consume 36 per cent of Gross Domestic Product (GDP) in 2022 in a revised estimate by the World Bank which factors in reduced federal revenue that spikes budgetary pressures and boxes states into difficult positions.
The new forecast in the June 2022 edition of the Nigeria Development Update (NDU) is 3.7 percentage points higher than the 32.3 per cent the World Bank projected in November 2021.
The World Bank raised its 2022 GDP growth forecast for Nigeria to 3.8 per cent on the back of a robust recovery in the non-oil economy and higher global oil prices.
It, however, expressed concern over rising inflation which it forecasts at 15.5 per cent in 2022, up from 13.5 per cent in the November 2021 NDU.
Reducing inflation is the key policy priority for the country, the World Bank stressed, warning that rising prices push more millions of Nigerians into poverty.
The report said fiscal deficit to GDP ratio will rise faster than earlier projected, raising it to 5.8 per cent for 2022, up from 5.3 per cent originally thought.
“Nigeria’s growth prospects for the next three years have improved thanks to a more robust recovery in the non-oil economy and higher global oil prices.
“We have revised growth estimates upwards:
“Nigeria’s gross domestic product, GDP, is projected to now grow by 3.4 per cent in 2022 and by 3.2 percent in 2023, up from the previous forecasts of 2.8 percent for 2022 and 2023 from November 2021, the report said.
______________________________________________________________
Related articles:
Buhari now spends 96% of revenue to service debt
Oil money losses can fund Buhari’s projects without loans
Abuja blames high debt on firms dodging N7tr tax payment
__________________________________________________________________
Reasons for revision
“Two factors explain the revision. First is the better-than-expected performance of the services and agriculture sectors. Second, higher oil prices stemming from the Ukraine war will boost Nigeria’s economic growth, though less than anticipated.
“Nigeria is in a paradoxical situation where growth prospects have improved, but the overall macroeconomic framework is deteriorating,” the World Bank added, per reporting by Vanguard.
“Compared to the last NDU, our revised estimates for inflation, the fiscal deficit, and public debt indicate a more vulnerable macroeconomic position in 2021 and the first half of 2022, which is further compounded by the increasing premium between the official and the parallel (black market) exchange rates.
The World Bank explained that the weakening of Nigeria’s macroeconomic framework is mainly due to the absence of concerted efforts to reduce inflation, address fiscal pressures, and strengthen exchange rate management.
“As a result, inflation is expected to be two percentage points higher in 2022–2023 than in our baseline scenario from six months ago.
“In addition, against a burgeoning petrol subsidy (estimated to cost over $9 billion in 2022 or almost 2 percent of GDP) and low oil production, the general government fiscal deficit for 2022 has been revised upwards from 5.3 to 5.8 percent of GDP.
“Consequently, the public debt ratio to GDP is projected to reach 36 percent in 2022, up from our previous 32.3 percent projection six months ago.”
 in 2022 in a revised estimate by the World Bank){kind=link}