Global Debt Declines by $4tn, First Drop Since 2015

•Nigeria, other developing countries’ debt hit record $98tn

•Toyota tops list of 10 most indebted companies

Ndubuisi Francis in Abuja

The amount of debt sloshing around the global economy witnessed its first annual drop in dollar terms since 2015, with a $4 trillion decline in 2022, according to a new report by the Institute of International Finance (IIF).

IIF is the global association of the financial industry, with about 400 members from more than 60 countries.

The IFF attributed the drop which brought the global debt profile fractionally back under the $300 trillion threshold partly to the post-pandemic rebound in growth as well as inflation.

However, the dip was driven entirely by wealthier countries, whose total debt declined by roughly $6 trillion to $200 trillion.

In contrast, the amount of developing world debt, including Nigeria’s, hit a new record high of $98 trillion, with Russia, Singapore, India, Mexico and Vietnam seeing the largest rises.

Nigeria’s public debt burden, including the N22.7 trillion Ways and Means Advances from the Central Bank of Nigeria (CBN) has continued to balloon, and is projected to hit N77 trillion or $171.8 billion (at the exchange rate of N448/$ when the tenure of the current administration terminates on May 29.

The IIF report noted: “The external public debt burden of many developing countries worsened due to sharp losses in local currencies against the dollar.”

The report noted that the ratio of global debt-to-GDP dropped by over 12 percentage points to 338 per cent of GDP, marking the second annual drop in a row.

But the improvement, it added, was again driven by developed markets, which saw an overall 20 percentage points fall to 390 per cent, stressing that the emerging market debt ratio rose by 2 percentage points to 250 per cent of GDP.

However, reports quoted investment bank, JPMorgan as saying that the modest falls in developed-market debt in 2022 pale into insignificance given the huge rise since the global financial crash 15 years ago.

It estimated that developed market public-sector debt as a share of GDP has surged to 122 per cent, from 73 per cent just before the crash.

“The step-change in debt in just 15 years raises questions of sustainability,” JPMorgan analysts say.

Meanwhile, Japan carmaker is leading the pack of ten most indebted companies in the world with a debt in the region of $200 billion.

According to data by the Institute of International Finance (IIF) and S&P Global, the debt of non-financial corporations has increased from 75 per cent of total global gross domestic product (GDP) in 2007 to 98 per cent last year (which along with the debt of governments, households and financial corporations brings the total aggregate worldwide debt to a record $300 trillion, a 349 per cent leverage on the gross domestic product).

In 2022, the Japanese company sold 10.5 million vehicles, retaining the title of the world’s top-selling automaker but also conquering that of the most indebted company of all.

By comparison, at over $200 billion, its long-term obligations are bigger than the external debt of a small country like New Zealand.

To stay on top, Toyota had to make massive investments in research and development and spend big on global operations and marketing. Some industry experts say toyota has been slow in transitioning away from traditional internal combustion and hybrid vehicles to all-electric vehicles (EVs).

Other leading debtor companies in the world are China’s Evergrande Group,China’s biggest—and the most indebted property developers; German carmaker,

Volkswagen AG; Verizon Communications; Ford Motor Company; Deutsche Bank; AT&T; Soft Bank; Deutsche Telekom AG, and Électricité de France.