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Borrowing to service debt portends severe vulnerabilities for the Nigerian economy – Muda Yusuf

Financing of the operations of government including personnel costs, overhead costs, capital expenditure and even part of the servicing of debt will have to come from additional borrowing which portends severe vulnerabilities for the Nigerian economy.

This was disclosed by Dr. Muda Yusuf Founder/CEO, Centre for the Promotion of Private Enterprise, CPPE in a statement viewed by NewsTimes titled, “Half Year Economic Review”.

Muda stated that FG’s fiscal outlook poses significant risks to macroeconomic stability amid heightened inflationary pressures, depreciating currency and increasing exchange rate volatility.

What Dr Yusuf is saying

According to Muda, the figures released by the Finance Minister, Mrs. Zainab Ahmed during the presentation of the 2023-2025 Medium Term Expenditure Framework painted a gloomy and disturbing picture of the state of government finances and suggests that the government is on the brink of bankruptcy.

“Debt service to revenue ratio for the first four months of the current year is over 100% (one hundred per cent). The implication of this is that the actual revenue of government over the period is not sufficient to service debt.

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“Therefore, financing of the operations of government – personnel cost, overhead cost, capital expenditure and even part of the servicing of the debt will have to come from additional borrowing. These portend severe vulnerabilities for the Nigerian economy.

“The fiscal outlook is clouded by elevated downside risks in the near term, driven largely by the huge burden of financing petrol subsidy, fiscal leakages, and unsustainable public debt trajectory. The outlook poses significant risks to macroeconomic stability amid heightened inflationary pressures, depreciating currency and increasing exchange rate volatility,” Yusuf said.

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He added that despite increased GDP growth of 3.11% in the first quarter of 2022 which marked the sixth consecutive quarters of GDP growth in the Nigerian economy “the increasing economic headwinds may dim the growth prospects for subsequent quarters”.

What you should know

  • NewsTimes recently reported that recent data released by the Ministry of Finance shows that Nigeria’s debt service cost surpassed its revenue in the first four months of the year, debt service gulped a sum of N1.94 trillion between January to aril 2022, against revenue of N1.63 trillion, citing that Nigeria spends 118% of revenue on debt service

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