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Over the years, Nigeria’s external debt level has consistently increased from single-digit level prior the year 2015 to double-digit level afterwards, with little impact on the growth of the economy, hence the need to justify why the country borrows.
The actors may differ but the story still seems to be the same, as external debt expands, economic growth contracts.
Nigeria’s economic growth has nosedived since national external debt began to swell again. Since 2014, Nigeria’s national external debt has increased 160 percent from $9.7 billion in 2014 to $25.27 billion as at December 2018.
While concerns have been raised on the rate at which the nation borrows externally which has necessitated some international bodies warning Nigeria against its rising levels, the story would have been different if these increases translated into higher real growth.
In the last 5 years, Nigeria, the most populous African country, has barely grown its economy at an average rate of 2.29 percent while growing its external debt at an average of 25 percent within the same period.
Foreign debt was accumulated to fund the ever growing budget deficit in the country. Rather than translate to faster economic growth, gross domestic product annual growth declined from 6.22 percent in 2014 to 1.95 percent in 2018.
Also, the latest National Bureau of Statistics (NBS) report on GDP showed a slowdown to 2.01 percent in Q1 2019 growth rate from 2.38 percent Q/Q.
The period also included one economic recession in 2016 and less than one percent growth in 2017, thus, calling into question the benefit of the expanding national debt on the economy.
Although we may blame the sluggish performance of the economy in the last four years on the collapse of crude oil prices as in the words of Patience Oniha, … Read More...