A few days ago i read a long article on LinkedIn, supported by some fairly ‘selective’ stats. The conclusion was that Nigeria has such a low relationship between public borrowing and GDP that we all have nothing to worry about.
More borrowing is ‘very ok’.
I completely disagree. The article didn’t lie. It simply reflected facts in a certain manner, and conspicuously left out some certain key ingredients.
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Some people do not like to include ‘bitter leaf’. But know if you leave that one out in some things you have to cook, the result will taste fake.
Even ogili sef.
Two stats that figured extensively in the argument was Nigeria’s place as the top country by GDP in the continent of Africa, and it’s relatively low % of GDP, which at the time, was slightly south of 25%
In Nigeria, towards the end of 2021, N2.54 trillion was added within three months.By the end of 2021, debt stood at over N38 trillion.
The Debt Management Office (DMO) said in December last year that the increase is due to N6.6 trillion in Eurobonds issued by the federal government in September, according to a report by TheCable.
The DMO has also got an agreed planned rise from 25% of GDP to 40% in staggered stages which started 2020 and are intended to end 2023. This is a bit scary.
The thing is, everything is about a nations citizens survival. GDP on its own is a fairly superfluous stat until it is combined with the population of the country.
This produces one of the most important statistics that represent citizen welfare – GDP per capita.
Nigeria’s official population figures are probably about as real as the CBN rates of FOREX.
We all know there is a hidden market where dollars and euros are worth more Naira than what CBN says.
In the same way, you will find when major political parties do their homework in preparation for elections, they discover human beings that census data seems to be unaware of… and that is only those eligible to vote.
Extrapolated intelligence driven estimates put the current population at around 270 million.
Current GDP per capita is $2396.04 as compared to $2502 the previous year, but with official stats always underestimating population, the real figure is probably around 25% less than that. In other words somewhere around $1800.
On official stats this puts Nigeria 18th on the continent of Africa but with adjustment for an artificially deflated population, it could be much lower than this.
The other statistic that is really important is the % of average household income that needs to be spent on food. At 58.9%, Nigeria spends more of its household income on food than any other nation in the world.
The lowest in the world, is the US, at 8.6%.
While the US is at a comfortable level, on household food spend, its debt as a % of GDP is alarming, running at 1.25, in other words 125%. This means despite an economy running at a tear away pace, it is dragging itself down into debt more and more with every passing year.
With a need to respond to the war between Russia and Ukraine, following on from having to take a strategic global lead in dealing with COVID, the US is having one set of extraordinary circumstances after another in respect of borrowing challenges.
No country should ever be allowing its borrowing to equal or exceed its GDP, regardless of how successful its economy is.
It is interesting that the SWIFT system hasn’t completely shut out Russia, with quotes from politicians referring to ‘some banks’. While the price of oil related commodities is fixed in dollars, this however does not stop trade actors citing the depressed rouble as an argument to get Russian exports at a discount.
While Biden has announced, ‘We’re banning all imports of Russian oil and gas and energy.
That means Russian oil will no longer be acceptable at U.S. ports, and the American people will deal another powerful blow to Putin’s war machine.’ – this doesn’t evidence that no company with some level of US ownership will buy Russian product and sell it on somewhere else.
Economic challenge is often lurking in what leaders fail to say, rather than what is on record.
Nevertheless, these challenges are US challenges and Nigeria should take no solace that such difficulties face arguably the strongest economy in the world.
Nigeria has to face difficult questions birthed in Nigeria and no foreign economy can offer lessons learnt.
With both Nigeria’s GDP per capita so depressed, even by African standards, and its income spend per household on food so inflated, it is questionable whether responsible political leadership can advocate any public borrowing at all, far less for a rise.
Time to stop borrowing.
All URLs accessed 10-03-2022
legit.ng/business-economy/economy/1448271-more-borrowing-increased-nigerias-public-debt-n38trn-2021-dmo-says/
premiumtimesng.com/news/top-news/442595-nigeria-raises-borrowing-limit-to-40-of-gdp.html
tradingeconomics.com/nigeria/gdp-per-capita
johnmckeown.tiny.us/9ja-regulate-foodcost-mypush
worldatlas.com/articles/countries-with-the-highest-expenses-on-food-relative-to-household-expenses.html
www.whitehouse.gov/briefing-room/speeches-remarks/2022/03/08/remarks-by-president-biden-announcing-u-s-ban-on-imports-of-russian-oil-liquefied-natural-gas-and-coal/