Nigeria’s debt profile which now stands atN21.73 trillion from N12.2 trillion in June 2015 has risen too rapidly, the World Bank has warned. A similar warning was also sounded for the rest of Africa.
The World Bank has raised the alarm over rising debts in African countries, including Nigeria.
Releasing ‘Africa’s Pulse’, a biannual analysis of African economies in Washington on Wednesday, the World Bank’s Chief Economist Africa, Albert Zeufack; Lead Economist, Africa, Punam Chuhan-Pole; and Research Manager, Michael Toman, said the continent had been showing positive growth but warned that its debt was increasing in at a very high rate.
Chuhan-Pole said although Nigeria’s debt remained low going by the debt to Gross Domestic Product (GDP) ratio, interest payment had been high.
“Interest payment as a share of government revenue is quite high. It raises issue of sustainability,” she stated.
Generally on the continent, she said, “The rate at which countries are accumulating debts is very high. Our countries need to pay attention to the rate at which debts are rising.”
The World Bank team spoke to journalists across African countries through video conference.
According to the team, the rising debt is led by some oil exporting nations, including Nigeria which have seen more than 50 per cent rise in debts recently.
Zeufack stated that the problem of Africa’s debt was not concessional loans secured from the World Bank, but commercial loans that countries in the region had gone ahead to secure.
According to him, such commercial loans come with exchange rate risks, global financial condition risks and commodity price risks.
The Debt Management Office recently put Nigeria’s debt profile at N21.73 trillion as of December 31, 2017, up from N12.2 trillion as of June 30, 2015.
The Federal Government had spent a total of N3.72tn to service local debt in the past three years while N1.48 trillion was spent on debt servicing in 2017.
With a total of N1.23 trillion and N1.02 trillion spent in 2016 and 2015, respectively, on domestic debt servicing, these add to a total of N3.72 trillion spent on domestic debt servicing in the last three years.
According to the World Bank, sub-Saharan Africa’s growth is projected to reach 3.1 per cent in 2018, and to average 3.6 per cent in 2019 to 2020.
The growth forecasts are premised on expectations that oil and metals prices will remain stable and that governments in the region will implement reforms to address macroeconomic imbalances and boost investment.
Zeufack said, “Growth has rebounded in Sub-Saharan Africa, but not fast enough. We are still far from pre-crisis growth levels.
“African governments must speed up and deepen macroeconomic and structural reforms to achieve high and sustained levels of growth.”
According to the World Bank report, it was necessary for African countries to embrace new technologies in order to address access to electricity, which is needed for production on the continent.
The World Bank said a combination of solutions, including national grid, mini-grid and off-grid technologies, were needed to address both availability and affordability of electricity in the region.