Analyst: Nigeria on the Cusp of a Debt Crisis, But Loans From China Not to Blame

The Nigerian Debt Management Office on Monday revealed that it has $5.8 billion of borrowed money on its books that it hasn’t disbursed. This prompted new worries among some financial analysts that the actual debt-to-GDP ratio has surpassed 100%, meaning that the country has taken on so much debt that it now needs to borrow more just to service those loans.

But the $8.4 billion in project-tied concessional loans from China is not the problem, according to Nnamdi Nwizu, Co-Managing Partner at Commercio Partner in an interview on CNBC Africa yesterday. Those concessional loans from the Chinese and multilateral lenders are much better than costlier Eurobond debt, he added.

Nwizu went on to provide a clear explanation for what he sees as a critical challenge facing Nigeria as it tries to manage potentially dangerous levels of debt:

From 2014 to 2020 Nigeria’s debts have almost tripled from about N11.2 trillion to about N32 trillion, so debt is really a cause for concern especially considering the rate of increase. 

Then’s there’s another N10 trillion that the central revealed is undisbursed. This will put us at N42 trillion and if you look at that, we’re basically at 40% debt-to-GDP ratio. And if we are to drill further down looking at debt service-to-revenue, we’re roughly at 92%. If we are to go by the ratio we’ve seen so far with regards to actual revenues versus budgeted revenues, which typically has been about 60%, we might now be about 100% debt service-to-revenue which means that we are really borrowing to service debt.

Watch the full interview on CNBC Africa’s website.

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The post Analyst: Nigeria on the Cusp of a Debt Crisis, But Loans From China Not to Blame appeared first on The China Africa Project.



source https://chinaafricaproject.com/2021/02/23/analyst-nigeria-on-the-cusp-of-a-debt-crisis-but-loans-from-china-not-to-blame/

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