Huge Debt: Nigeria will not default but struggle – Rewane

The Chief Executive Officer of Financial Derivatives Limited, Bismarck Rewane, has assured that despite Nigeria’s rising debt profile, the country is unlikely to default on its loan repayments. Speaking at the 14th edition of Algha Morgan’s Wealth and Economic Review, Rewane noted that while Nigeria would meet its debt obligations, it would face significant challenges unless critical and comprehensive economic reforms are implemented swiftly.

Rewane highlighted that Nigeria’s debt servicing costs have been rising sharply, consuming a large portion of government revenue. This, he warned, could hamper the country’s ability to invest in critical infrastructure and social services. According to him, without urgent fiscal discipline and strategic economic management, the country may be forced to cut essential expenditures, thereby slowing economic growth and development.

The economist further explained that global economic conditions would play a crucial role in shaping Nigeria’s financial outlook. He pointed out that increasing global trade tensions and retaliatory tariffs could limit Nigeria’s export opportunities, particularly in non-oil sectors, while simultaneously raising the cost of imports. This scenario, Rewane said, would weaken Nigeria’s trade balance and add further strain to the already pressured naira.

Moreover, Rewane emphasized that a decline in global demand for crude oil, Nigeria’s primary foreign exchange earner, could significantly impact the country’s forex inflows. This, coupled with the risk of lower oil prices, would shrink government revenues, widen the budget deficit, and limit the fiscal space necessary for stimulating economic growth. The resulting revenue shortfall could further deepen Nigeria’s dependence on borrowing, exacerbating the debt burden.

In addition to fiscal pressures, Rewane warned that a weaker currency and higher import costs could fuel inflation, thereby eroding the purchasing power of Nigerians and lowering living standards. He stressed that inflationary pressures would disproportionately affect the poor and vulnerable, leading to increased social discontent and widening income inequality unless decisive policy actions are taken.

Rewane also cautioned that heightened global economic uncertainties could deter foreign direct investment (FDI), especially in Nigeria’s non-oil sectors. To mitigate these risks, he recommended that the government implement robust economic policies aimed at diversifying the economy, improving the business environment, and attracting sustainable investments. According to him, only bold and strategic reforms will enable Nigeria to navigate its debt challenges and achieve long-term economic stability.