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Nigeria’s fiscal deficit to GDP to close 2022 at 6.2 percent

The International Monetary Fund (IMF) has described sub-Saharan Africa (SSA) at the moment as a region “living on the edge”. This comes via its regional economic outlook released yesterday. Like other regions, the Fund said the outlook of the region is extremely uncertain as geopolitical tension, monetary tightening, and food price crisis continue.

The report identifies four policy priority areas as different countries explore options to navigate the economic challenge. It urged African governments to address food insecurity, manage the shift in monetary policies, consolidate dating public finances and set the stage for sustainable/greener growth.

IMF puts the region’s debt to gross domestic product (GDP) this year at 24.1 percent while that of next year is estimated at 23.8 percent. The figure averaged 15.3 percent from 2010 to 2018 but jumped to 22.8 percent in 2019 and 26.5 percent in 2020 amid the COVID-19 tumult.

Last year, the ratio closed at 24.6 percent. Nigeria’s debt to GDP is among the least in the region at 9.1 percent. The figure was 3.1 percent from 2010 to 2018.

But the country’s government debt to GDP is expected to climb up to 38.6 percent

next year, from 37.3 percent this year. Last year, Nigeria’s government debt to GDP was 36.6 percent while that of the entire SSA was 57 percent and is expected to come down to 53.7 percent next year.

Nigeria’s sovereign debt to GDP is rising while those of the rest of African countries are climbing down. Also, IMF projects Nigeria’s fiscal deficit to GDP to close this year at 6.2 percent of GDP (which is higher than SSA’s average projection of 4.5 percent) and scale down to 5.8 percent next year. The figure was six percent last year as against the three percent average record from 2010 to 2018.

“On public debt, regional indebtedness is now approaching levels last seen in the early 2000s before the impact of the Heavily Indebted Poor Countries Initiative, though with a different composition. The substitution of low-cost, long-term multilateral debt with higher-cost private funds has resulted in rising debt-service costs and higher rollover risks.

“Nineteen of the region’s 35 low-income countries are in debt distress or at high risk of distress. Out of the other ten countries of the region, three have faced spreads of more than 1,000 basis points at some point over the past six months (Angola, Gabon, Nigeria),” the report states.

It notes that the price crisis in the region continues to mirror worldwide trends “where inflation has increased more rapidly and more persistently than expected,

and where incomes have been squeezed by hikes in the cost of living.

“Recent inflation increases may appear less striking relative to historical averages for sub-Saharan Africa, especially for countries with fixed exchange rates, but much of the recent movement has been driven by essential food and energy items, which are imported in many countries and average 50 percent of the region’s consume.

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