Under President Muhammadu Buhari’s administration, Nigeria’s total external debt has increased from the $10.32 billion that his administration inherited in 2015 to $40.06 billion as of today.
According to the Debt Management Office’s external debt stock statistics, there has been a growth of 288.18% over the past seven years.
According to a breakdown, the federal government has $7.05 billion in external debt in 2015, compared to 36 states’ $3.27 billion.
State external debt increased to $4.56 billion by 2022, while federal external debt reached $35.5 billion.
Loans from multilateral institutions including the World Bank, the African Development Bank, and the International Monetary Fund were among the obligations.
Additionally, they comprised commercial financing from sources including Eurobonds and Diaspora bonds, as well as bilateral loans from China, France, Japan, Germany, and India.
As the value of the naira declined, Nigeria’s external debt increased, burdening the country with more debt and impairing its ability to pay it back. According to recent data from the International Monetary Fund, the naira has lost 10.6% of its value annually since 1973 at the long-term pace of devaluation.
The IMF estimates that over the same period, this rate was 1.5 times higher than the long-term rates of the currencies of other emerging markets and developing economies, which stood at 7.2% and 7%, respectively.
Its exchange rate had a more enduring depreciation, according to the IMF. In comparison to both EMDE (7.2%) and SSA, Nigeria’s long-term rate of currency depreciation—an average of 10.6% annually since 1973—was 1.5 times higher (seven per cent). It is challenging to pinpoint the precise causes given the scarcity of long-term data.
Nigeria’s local currency unit is expected to lose more ground next year, according to the Bank of America, as its current exchange rate to the dollar is far higher than its fair value.
The central bank’s true effective exchange rate, the frequently utilized black market rate, and our own currency fair value research all indicate that the naira is 20% overvalued, the bank claimed, according to a Bloomberg story.
Over the following six to nine months, “we see potential for it to weaken by a comparable amount, putting it to as high as 520 per USD.”
Financial experts suggested that Nigeria and other West African countries move away from relying on foreign aid to the financing of regional development initiatives during a workshop on tax expenditures held by the ECOWAS Commission in Abuja.
They contend that an excessive reliance on outside loans and aid could have an adverse impact on the long-term prosperity of the entire area.
