Economist and Director at Escap Management, Esili Eigbe, has sounded a dire warning about Nigeria’s economic trajectory,citing high inflation and a soaring national debt as major concerns.
Eigbe in an interview with ARISE NEWS on Wednesday, emphasised the urgent need to address the twin challenges of high inflation and a soaring national debt, which threaten to derail Nigeria’s economic progress.
“We need to start addressing our economic issues somewhere, and that somewhere is tackling inflation. You can’t experience real growth until you’ve dealt with inflation.
“The main reason the IMF downgraded Nigeria’s growth projection is because of inflation.’The higher the inflation, the less your real growth.’ That’s the essence of GDP growth,”Eigbe said.
Eigbe noted that inflation poses a significant threat, and if left unaddressed, it would hinder Nigeria’s economic growth.
While the Central Bank of Nigeria is working to reduce inflation, he stressed that fiscal responsibility is crucial to complement their efforts and achieve meaningful progress.
“We haven’t seen sufficient support from the fiscal side, which has contradicted the Central Bank of Nigeria’s (CBN) efforts.
“The CBN has been expansionary, but we need to check government spending to avoid a debt crisis. We’re still in the Covid era, with excessive borrowing and massive stimulus that needs to change,” Eigbe said.
Nigeria’s public debt has risen alarmingly, exceeding 18% per annum over the past decade.
Eigbe warned that the debt stock is projected to reach a staggering N150 trillion by the end of 2023 and N200 trillion by 2026.This unsustainable trajectory poses significant risks to Nigeria’s economic stability.
“Nigeria’s public debt has risen alarmingly, exceeding 18% per annum for the past 10-15 years. As of the first quarter, our debt stands at N118 trillion, and I project it will reach N150 trillion by the end of this year and potentially N200 trillion by 2026,”he added.
The economist also expressed concerns about the potential impact of a Donald Trump presidency on Nigeria’s economy.
He said, Trump’s mandate to increase US production could lead to a global price crash, which would have devastating effects on Nigeria’s economy.
“We face a high possibility of Donald Trump winning the US election, which spells trouble for Nigeria. His mandate is to boost US production, increasing global output and causing prices to plummet.
“This would be devastating for Nigeria, making it essential for us to plan ahead. We cannot continue with our current debt levels; we must take action,” Eigbe warned.
Eigbe criticised the government’s subsidy spending, stating that N25 trillion has been spent on subsidies over the past 14 years.
He argued that this amount could have funded critical infrastructure projects, such as building another Dangote refinery, 500,000 hospital beds, 150,000 university classrooms, or 12,000 kilometers of roads.
“We’ve spent a staggering N25 trillion on subsidies over the past 14 years, equivalent to building another Dangote refinery capable of producing 650,000 barrels per day. “
“Alternatively, it could have funded 500,000 hospital beds, 150,000 university classrooms, or 12,000 kilometers of roads, which is about 10% of our current road network,” Eigbe said.
“It’s illogical that we’re sacrificing critical infrastructure for subsidies that don’t make economic sense. Our healthcare spending per person is only N6,000, and education spending is around N9,500 per person.
“Meanwhile, we generate about N54,000 per capita from all revenues, with half of it going towards subsidies. This is a gross misallocation of resources,”he said.
Instead of rice distribution, Eigbe advocated for cash transfers to vulnerable citizens, citing the inefficiency of the current approach.
“The government’s rice distribution is inadequate, with only 20 trucks per state, amounting to roughly 24,000 bags per state. This is insufficient for a state like Lagos with nearly 20 million people,” he explained.
Eigbe warned that failure to address these economic challenges would have severe implications, including: Downgrade in credit rating, recession, rising borrowing cost, persistent inflation, currency problems.
He emphasised that the road to recovery is difficult, and the government’s financial situation is precarious. “We need to start thinking and planning ahead to avoid these crises,” Eigbe urged.
