Adebajo: Nigeria’s Mounting Debt Crisis Calls for Immediate Legislative Action

Nume Ekeghe

Amidst a sharp rise in Nigeria’s external debt to approximately $45 billion and an exodus of investors, the Chief Executive of CFG Advisory, Tilewa Adebajo, has emphasised the need for urgent legislative intervention and a comprehensive overhaul of the country’s trade, industrialisation, and investment policies.

The Debt Management Office (DMO) recently reported that Nigeria’s total debt encompassing both external and domestic obligations had escalated to N121.67 trillion as of March 31, 2024. This figure marks a significant increase from N97.34 trillion at the end of the last quarter of 2023, covering the debt responsibilities of the federal government, the 36 states, and the Federal Capital Territory (FCT).

At the Bi-monthly forum of the Finance Correspondents Association of Nigeria (FICAN) in Lagos, Adebajo noted that despite the country receiving positive outlook ratings from some credit rating agencies, Moody’s Investor Services’ Caa1 rating still places Nigeria in the junk bond category.

He said: “The unchecked fiscal expenditure and unauthorized ways and means of financing now over 30 times the legal limit at N30 trillion pose a significant threat to Nigeria’s economic recovery from stagflation to sustained growth in 2024.”

Highlighting that Nigeria’s debt servicing obligations are poised to surpass its revenue, Adebajo stressed the need for remedial legislation to address the fiscal imbalances. He argued that the Senate lacks the authority to securitize the Ways and Means advances, branding such actions as illegal.

He added: “The government must negotiate with creditors to restructure and extend the maturities of debt, enabling more manageable repayments and reduced interest rates. Learning from the defaults of Ghana, Zambia, and Ethiopia on their external debt obligations is crucial for Nigeria.”

Addressing the recent wave of companies exiting the country, Adebajo underscored the urgent need to revamp Nigeria’s trade policy and investment climate. He called for prioritizing trade, investment, and industrial policy to stabilize and invigorate the economy.

“Reviving an economy in stagflation with low GDP growth, high debt levels, and fiscal deficits is a formidable challenge. Nigeria needs to adopt a mix of short-term and long-term strategies to steer the economy toward sustainable growth,” Adebajo said.

He proposed austerity measures, including implementing fiscal discipline by cutting non-essential government spending, eliminating wasteful subsidies, and enhancing the efficiency of public services. On taxation, Adebajo suggested expanding the tax base, improving tax collection, and introducing new revenue sources such as value-added tax (VAT) and property taxes, rather than raising existing tax rates.

Furthermore, Adebajo said: “Enhancing transparency and accountability in government spending is essential to building public trust and attracting foreign investment.”