African countries, Nigeria inclusive, have been advised to institute effective debt management strategies to boost economic growth and avoid falling into the debt trap.
Speaking at a workshop on debt management strategies for member states, the Economic Commission for Africa (ECA) Director for Macroeconomics and Governance Division, Adam Elhiraika, said debt management was a challenge for African countries, as debt becomes a significant source of funding for their economic growth and development.
Countries often rely on debt to finance growth and development but Nigeria’s debt-to-GDP ratio has been on the rise in the last few years, currently estimated to be at 23 per cent.
With the country’s debt profile expected to spiral even more, this present administration led by President Muhammadu Buhari, would leave a N77 trillion debt behind when it leaves power next month.
While debt is not necessarily a bad thing, rising public debt such as Nigeria’s, is crowding out private investments, threatening economic growth through high long-term interest rates and worsening inflation.
The extensive use of domestic borrowing is having a severe impact on the economy as debt servicing continues to consume a significant part of government revenue.