Nigeria’s Economic Crisis Deepens Amid High Debt Servicing- IMF Warns

The International Monetary Fund (IMF) has sounded the alarm on Nigeria’s deepening economic woes, citing stalled per-capita growth, escalating poverty, and soaring food insecurity as exacerbating factors in the ongoing cost-of-living crisis.

In a report titled ‘IMF Executive Board Concludes Post Financing Assessment with Nigeria,’ the global lender highlighted Nigeria’s struggles with rising inflation, currency instability, feeble economic expansion, and widespread business closures.

“Per-capita growth in Nigeria has stalled, poverty and food insecurity are high, exacerbating the cost-of-living crisis,” the IMF report stated. “Low reserves and very limited fiscal space constrain the authorities’ option space.”

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The report attributed Nigeria’s headline inflation of 27 percent year-on-year in October, with food inflation reaching 32 percent, to the removal of fuel subsidies, currency depreciation, and poor agricultural output.

Additionally, it outlined the scarcity of external financing and the surge in global food prices due to conflict and geopolitical fragmentation as significant challenges.

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Commenting on Nigeria’s economic outlook, the IMF expressed cautious optimism about the new administration’s efforts to address structural issues, particularly commending its decision to remove fuel subsidies and unify exchange rates.

It noted that the Central Bank of Nigeria’s renewed focus on price stability and the government’s commitment to domestic revenue mobilization were steps in the right direction.

However, concerns loom large over Nigeria’s mounting debt burden, with the country owing the IMF $2.8 billion and projecting an expenditure of N8.2 trillion on debt servicing in the 2024 budget. Professional services firm PricewaterhouseCoopers (PwC) echoed these apprehensions, warning that escalating debt service costs could strain Nigeria’s ability to service debts, impact its credit rating outlook, and increase borrowing costs.

“With a high debt servicing to revenue ratio, the government aims to increase domestic debt in 2024 to meet its deficit funding requirements,” PwC cautioned.

As Nigeria grapples with these economic challenges, stakeholders emphasize the urgent need for reforms to stabilize the economy, spur growth, and alleviate the burden on its citizens.

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