The Scary Inflection Point on Nigeria’s Borrowing

The Scary Inflection Point on Nigeria’s Borrowing

This is the most consequential inflection point in all the plots in Nigeria which have been flipping recently. Simply, the next generation of Nigeria could be poorer than the current one if we do not reverse it urgently. Of course, I am not sure the current generation is doing amazingly fine! Do not make this a political thing (APC or PDP, Buhari or GEJ or OBJ) – see this as an entrepreneurial capitalism challenge.If Apple Corp is Nigerian, generating our national budget every 6 weeks on revenue (with the associated taxes), all these plots will align in phase.

Seriously, Nigeria is running out of luck with international market for borrowing, and the Central Bank of Nigeria (CBN) has been financing government. The 2016 recession caused massive dislocation and changed the equilibrium of things: the CBN loan to federal government of Nigeria (FGN) exceeded the FGN deposit with CBN. In 2019, the net loss is projected to hit N5 trillion. That is a very big number. You can say we are eating more than we can produce! You know the implication of that – you are stealing from the future. 

Interestingly, the FGN improved deposits,possibly because of the TSA implementation. Unfortunately, more money is going out as population continues to grow, faster than the economic growth. Also, you can blame the Boko Haram and other pockets of security issues for the massive spending.

Largely, what is happening here is that government cannot effectively borrow internationally. So, it relies on CBN to finance its spending. And CBN keeps selling treasury bills (TB) in the local market to sustain the party.

Pure and simple  – the party will end one day, and unless FGN gets improved tax receipts, the CBN playbook will derail the growth of critical sectors as the treasury bills financing is taking good money investors would have put in companies into the hands of government. That is a concern as CBN can make TB to return 20% annually (from sub-14% today) to keep making it exciting to investors.

Nigeria needs growth urgently to finance spending for its growing population. Otherwise, I am not sure how we can come out of this paralysis. I just hope they do not focus on more taxes alone to reconcile these net losses. The playbook must be growing the economy which will then activate more taxes!

In trillions of Naira




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3 thoughts on “The Scary Inflection Point on Nigeria’s Borrowing

  1. When there is conflation of scam and delusion, this is the sort of outcome you end up having; there is a limit to what lies and manipulations can do, before the final collapse happens.

    But for any policy or approach to be meaningful, there are different categories of Nigerians we must first educate, else nothing reasonable would be achieved.

    The first group are those who believe that Nigeria is so rich, just that few people are stealing the commonwealth, leaving the rest of their compatriots to suffer. That assumption is false, Nigeria is never rich or wealthy, even with nobody stealing a kobo, our output is still far below our needs, plus the growing population. Without understanding and resolving this singular issue, forget development, because everything has been built on false foundation.

    The second group are those stealing the small thing available, with the thinking that the country so rich, and therefore what they steal won’t have much impact, just their portion of the national cake! This is another false assumption, so the earlier the robbers and thieves understand that the country is already on life support, the better.

    Then we need a CBN with strong character, not the one that panders to political exigencies.


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