Nigeria: Sanusi Advocates Debt Relief for Nigeria, Retooling Debt-to-GDP Benchmark

A former Governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, has advocated debt relief for Nigeria as it mounts, saying the debt-to-Gross Domestic Product (GDP) ratio is a useless way of measuring debt sustainability.

Speaking on Thursday at the online roundtable discussion on Debt Relief for a Green and Inclusive Recovery in Nigeria organised by the Heinrich Böll Foundation, Sanusi said Nigeria does not service debts from GDP as the bulk of the economic sectors contributing to the GDP do not pay tax and as such, basing debt sustainability on the debt-to-GDP ratio is misleading.

The Heinrich Böll Foundation said Nigeria's debt doubled from N12.6 trillion in 2015 to N27.1tr by 2019.

"By the end of 2021, this figure is expected to rise to 38.7 trillion Naira. Whilst the debt-to-GDP ratio remains low (estimated at 35% for 2020), debt servicing costs have reached worrisome levels. In 2020, the federal government of Nigeria spent the equivalent of 83% of its revenue to service debt.

"The debt service to revenue ratio rose to as high as 99% in the first quarter of 2020 as revenues dropped due to the collapse in global oil prices," the Foundation said.

Reacting, the former CBN boss said debt relief is absolutely necessary for Nigeria to pursue any serious economic development.

He said China, being a major global creditor, should play a key role in debt relief conversations.

Sanusi advocated for social policies on the population in Nigeria to reduce poverty by aligning population growth with economic growth.

Similarly, a panel expert at the event from the Centre for the Study of Economies in Africa, Mma Amara Ekeruche, said Nigeria's external debt is nearing the pre-Multilateral Debt Relief Initiative (MDRI) level but the creditor landscape has changed towards private creditors and multilateral that are not as willing to stop the clock on debt service payments.

"While several debt metrics point to the unsustainability of debt, with the exclusion of the debt to GDP ratio, the situation is more worrisome as there are other forms of debt not accounted for in the official figures," she said.

Another panel expert from Global Development Policy Centre, Kevin Gallagher, said China has provided up to $10 billion in debt relief to the world economy since the outbreak of COVID-19.

Gallagher said China is a key player in the global move towards debt relief to struggling economies across the world and Nigeria should leverage on it. He advised Nigeria to align its national financial policies to Sustainable Development Goals (SDGs) and Paris Club commitments.

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