Akinwumi Adesina, President of the African Development Bank (ADB) has said Nigeria needs help from the international community in tackling its debt burden.
This statement was made by Akinwumi Adesina at the Nigeria International Economic Partnership Forum in New York on Thursday when he stressed that financing was key to solving Nigeria’s development challenges.
What AFDB President is Saying
Pointing to the mounting debt in Nigeria and other African countries, the President of AFDB stated that a lot of African countries have a huge risk of debt distress, emphasizing that Nigeria and other African countries need debt relief.
Adesina said, “Financing is critical because the debt to GDP ratio of Africa has increased to 70 percent — several countries are the risk of high debt distress due to unstable, unsustainable debt levels,” he said.
“Nigeria’s total debt level is N42.84 trillion or $103 billion. External debt levels stand at N16.61 trillion or $40 billion. Ladies and gentlemen, Nigeria needs help to tackle this debt burden.
“International partnerships on debt are helping Africa and Nigeria. The issuance of special drawing rights (SDR) by the International Monetary Fund of $650 billion helped provide liquidity support for countries. However, Africa only received $33 billion out of all of that. Pretty small.
“A call made by the African heads of State for developed economies to re-channel $100 billion of additional SDRs to Africa will go a long way to reduce the debt burden in Nigeria.
“Allocating this SDR, some of this, through the African Development Bank will allow us to leverage it four times because we are a leveraging machine. We can deliver more financing to Nigeria and Africa.
Speaking about development in Nigeria, Adesina said the country’s progress will be conditioned on its ability to fix its massive infrastructure deficit. He said, “the National Integrated Infrastructure masterplan shows Nigeria would need a total financing of $759 billion up until 2043.”
He added that African countries, including Nigeria, need international partnerships to tackle climate change.
What you should know
Nigeria’s rising total debt has not been accompanied by a corresponding increase in revenue generation. Even though the country’s debt to GDP ratio seems to be in line with the debt target, a significant portion of Nigeria’s revenue goes into servicing these debts (about 86 percent of revenue was used to service debt in 2021 and IMF projects 92 percent in 2022). This has led to a clampdown on the funds required for massive infrastructure investment.
With the US Federal Reserve’s recent interest rate hike, a lot of foreign investors will be attracted to dollar-denominated investment, thereby further strengthening the dollar. The implication of this is that as the dollar becomes stronger relative to the naira, the repayments of dollar-denominated debts will become much more expensive (in naira terms).
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