Home Top Stories How Buhari accumulated $40b national debt for his successor

How Buhari accumulated $40b national debt for his successor


Abuja (Sundiata Post) – External debt rose from $10.32 billion on 30 June 2015 to $40.06 billion on 30 June 2022, an increase of 288.18 per cent in the seven years of Muhammadu Buhari in the saddle in Aso Rock.

His successor will inherit the burden of servicing this debt and repaying the principal plus other loans he will obtain before he serves out his tenure on 29 May 2023.

Latest Debt Management Office (DMO) shows the federal government had $7.05 billion debt and the 36 states $3.27 billion in June 2015, which increased to federal ($35.5 billion) and states ($4.56 billion) in June 2022, the PUNCH has said.

The debt included loans from multilateral sources such as the World Bank, African Development Bank (AfDB), and International Monetary Fund (IMF).

It also included bilateral loans from China, France, Japan, Germany, and India, as well as commercial sources including Eurobonds and Diaspora bonds,

External debt has ballooned as the naira has lost value, costing more to service loans, with the IMF recently disclosing naira depreciation equated to a loss of 10.6 per cent of its value every year since 1973.

Naira to weaken further

Naira depreciation rate is 1.5 times higher than the long-term rate of the currencies of other emerging markets and developing economies (EMDE) and Sub-Saharan Africa (SSA) over this period of 49 years, according to the IMF.

“Its exchange rate underwent more persistent depreciation. Nigeria’s long-term rate of currency depreciation (on average 10.6 per cent annually since 1973) was 1.5 times higher than both EMDE (7.2 per cent) and SSA (seven per cent). Given limited availability of long-term data, it is difficult to estimate the exact reasons,” it said.

The Bank of America warned the naira is set to weaken further next year as its current exchange rate to the dollar is well above fair value.

“Three indicators, the widely-used black-market rate, the central bank’s real effective exchange rate, and our own currency fair value analysis shows the naira is 20 per cent overvalued,” the bank said, per The PUNCH, quoting Bloomberg.

“We see scope for it to weaken by an equivalent amount over the next six-nine months, taking it to as high as 520 per USD.”

Debt burden across ECOWAS countries

Financial experts have advised Nigeria and other West African countries to move away from reliance on foreign assistance to the financing of developmental projects.

They explained at a workshop on tax expenditure organised by the ECOWAS Commission in Abuja that over-dependence on financial aid and external loans may affect the long-term prosperity of the region.

Gbenga Falana, Special Advisor to ECOWAS Custom Union and Taxation Director, reiterated the debt of countries in the region is mounting and urged them to look inward and finance projects through effective domestic resource mobilisation.

Cowry Asset Management Chief Executive Officer Johnson Chukwu warned high external debt imposes a huge debt service cost.

“This will impose a huge debt service on the economy, particularly at a period when we have low revenue from oil sales.

“If the revenue from oil sales does not improve, then the government will be struggling to meet that debt service obligation to foreign lenders,” he said.

He explained Nigeria could service its foreign debt at the current level but a constant increase in debt without a corresponding increase in foreign currency earnings could put the country in a difficult position.

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