By Sodiq Adelakun
The International Monetary Fund (IMF) has stated that Nigeria’s total debt of over N87 trillion is still at a moderate level compared to other countries.
The IMF Resident Representative in Nigeria, Ari Aisen, emphasized the need for Nigerians to address the underlying issues driving this high debt situation.
A recent report by the Debt Management Office (DMO) revealed that Nigeria’s total debt reached N87.4 trillion as of June 2023, causing concern among both Nigerians and foreigners who fear a lack of significant development amidst the country’s economic challenges.
Aisen highlighted the importance of implementing fiscal policies to reduce the government’s financing needs.
“As for now, the debt-to-GDP ratio is still at a moderate level in Nigeria. It is very important that policies are put in place, particularly fiscal policies, to reduce the financing needs of the government,” Aisen said.
“The removal of fuel subsidy was a very important step because fuel subsidy cost 2 percent of GDP last year and were adding to the financing needs and the stock of debt of the country.”
He urged that this new administration focus more on containing the needs of the government so that the debt stock does not rise any further.
Meanwhile, on President Bola Ahmed Tinubu’s GDP growth target of 7 percent annually, Aisen admitted that achieving that growth target may be very challenging, especially as the economy continues to face so much stress as a result of high living costs caused by the removal of fuel subsidy and higher prices of commodities.
“But we are in a transition period, and the initial move of the reforms shows that we are in the right direction. The removal of fuel subsidy and the unification of exchange rates,” he praised.
“These reforms need to continue to reach what we will call macroeconomic stability because if inflation can get lower and the exchange rate is more predictable, then investment can actually start coming to Nigeria.”
He advised that the reforms have to be well managed to avoid any reversal of subsiding fuel and controlling the exchange rate.
He explained that these reform transitions will, in the long run, lead to a better economy. Aisan reminded all that the Nigerian economy has in the past grown into double digits, and such growth can be repeated if the government continues with its right policies and provides a lot of support to the business sector. Growth of 7 percent can be achieved, he emphasised.
“We are going to see Nigeria again double its growth rate,” the IMF representative said.