IT is paradoxical that less than two months after Nigeria reportedly exited a second recession, the outlook of the economy appears bleak. The latest economic indices show a rise in inflation, unemployment and national debt stock. These indices are likely to hamper the nation’s economic growth and development. According to data released by the National Bureau of Statistics last week, inflation rose to 17.33 per cent for the month of February, the highest level since March 2017.
Also, foreign deficit declined to N7.37 per cent, the lowest in five years, while unemployment rose to 33.3 per cent, representing the third highest in the world, and external reserves fell to the lowest in 10 months at $34.74 billion with a decline of $632.9 million. These indicators signpost tough times for the economy, which is struggling to overcome the impact of COVID-19 pandemic. There is need for urgent policy measures to stimulate economic growth.
On the headline inflation, for the second time back -to-back, food inflation in particular, has outgrown the rate at any other time since 2009, with latest urban inflation at over 21 per cent. The rise in food prices captured in the NBS report was linked to the rising insecurity in many parts of the North. Worse still, the unemployment data for the fourth quarter, 2020 showed that youth unemployment was high, raising concern that this could be a time bomb with dire consequences if not urgently addressed.
Similarly, the latest report from the Debt Management Office (DMO) showed that the total debt profile rose to N32.9trillion as at December 2020. This represents an increase of N700billion within three months. The report also revealed that the total public debt to the Gross Domestic Product (GDP) was 21.61 per cent. However, this is within Nigeria’s new threshold of 40 per cent.
Without doubt, a rise in inflation, unemployment and national debt stock will come with far-reaching consequences for the economy and tougher times for Nigerians who are already groaning under serious hardship. Therefore, it bears repeating that worsening debt profile, unemployment, inflation and insecurity are major challenges facing the economy, especially since the present administration came to power almost six years ago.
On the national debt, it is sad that from $18.89 billion that the Buhari administration inherited in May 2015, Nigeria’s national debt stock has grown progressively worse to the present $32.9billion. Experts have warned that the debt could rise to N42trillion when the conversion of the Federal Government’s overdrafts with the CBN is completed. DMO recently said the conversion deal would be for a 30-year debt instrument.
So far, Nigeria has taken loans worth $31.98 billion from the World Bank Group, International Monetary Fund (IMF), African Development Bank (AfDB) Group and others. Nigeria also has an outstanding $10.74 billion loan to be paid to the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD) and many others.
With these outstanding loans, Nigeria may be approaching debt overhang, if the economy does not recover quickly, and the government’s revenue generation remains weak.
Our concern about the borrowing binge is that while the effect of the increasing debt might not be immediate, it could have negative implication in the long-term with a big chunk of the revenue going for debt servicing at the expense of infrastructure development. Already, N3.2 trillion has been put aside to service debt in the 2021 budget. With the national debt stock, inflation and unemployment rates on a steady rise, it has become expedient to come up with innovative economic measures that will alleviate the prevailing challenges. We say this because the extant government’s policies have not yielded the desired results.
The government should also be reminded that part of its campaign promise in 2015 was to fight unemployment and stimulate economic growth. Diversification of the economy outside the oil sector, especially agriculture and other non-oil sectors of the economy remains the best option to create jobs and reduce the unemployment, rising inflation and food prices. Government must provide the enabling environment to enhance Ease of Doing Business and provide other incentives that will be attractive to investors and small business entrepreneurs in the country.