‘We’re deeply concerned’: LCCI says Nigeria’s debt fast becoming unsustainable

The Lagos Chamber of Commerce and Industry has expressed concern over Nigeria’s rising debt stock, saying it is fast becoming unsustainable.

The LCCI, in its press briefing on the state of the economy on Tuesday, noted that public debt stock grew by eight percent to N31 trillion at the end of the second quarter, equivalent to 21 percent of GDP.

Its President, Mrs Toki Mabogunje, said the group “is deeply concerned about the country’s rising debt portfolio without corresponding impact on output growth and economic development.”

She noted that the increase in public debt stock was fuelled by fresh domestic and external borrowings required to plug the wider fiscal deficit in the revised 2020 budget, given the impact of the COVDI-19 pandemic on oil and non-oil sources of revenue.

“We also note the impact of recent exchange rate depreciation on the country’s level of external indebtedness,” she said.

The group recalled that at the peak of the pandemic in the second quarter, the Federal Government received financial support worth $3.4 billion and $288.5 million from the International Monetary Fund and the African Development Bank respectively.

“Negotiations are also ongoing for a cumulative $1.8 billion credit support from the World Bank, African Development Bank (second tranche) and Islamic Development Bank,” Mabogunje said.

She said adding this to prospective domestic issuances could possibly push the country’s public debt stock to around N34 trillion by year-end, equivalent to 23 percent of GDP.

She added, “The growing level of the country’s debt is fast becoming unsustainable in the light of dwindling oil prices and production. Our position is reinforced by the uptrend in debt-service to revenue ratio from 60 percent by year-end 2019 to 72 percent as of May 2020.

“The high level of debt servicing continues to hinder robust investments in hard and soft infrastructures which are key to stimulating productivity and improving living standards.”

The LCCI commended policymakers for their interventions in reflating the economy and supporting businesses, saying special attention should be given to sectors severely impacted by the pandemic. 

Mabogunje said, “The federal and state governments need to expeditiously redirect attention to these sectors including aviation, hospitality, entertainment, and manufacturing. 

“This has become necessary to protect jobs, preserve investments and provide the much-needed liquidity required to revive these sectors.”

The chamber also raised concern about the recent incidents of flooding in key food-producing states in the North, saying the occurrence had wiped off food and cash crops on a large scale and disrupted output projections in agriculture.

Citing local media reports, it said over two million tons of rice were lost to flood, adding that other crops such as sorghum, corn and millet were also affected.

“This situation, if not expeditiously addressed and managed, would escalate the pressure on food prices, thereby putting the country on the verge of a food crisis,” Mabogunje said.