Bola Tinubu, Nigeria’s incoming president, will be faced with a number of difficult challenges, including sluggish economic growth, record debt, and falling oil production.
Foreign investors are wary of Africa’s largest economy due to a complex web of protectionist economic policies and currency interventions.
Ten years ago, Nigeria attempted to reduce its massively expensive fuel subsidies, but the plan was scrapped in the face of widespread public opposition.
A supporter of President Muhammadu Buhari’s All Progressives Congress party, Tinubu was instrumental in Buhari’s 2015 election victory.
Now that he has served as governor of Lagos state, businesses, international investors, and ordinary Nigerians are hoping he can use his experience to revitalize the country’s flagging economy and force the country to face its most intractable problems.
IN TROUBLE AND DEBT
The Debt Management Office estimates that Nigeria’s total debt reached $103 billion in 2018. This is an increase of nearly 60% since 2015. The government has warned that once off-balance-sheet loans from the central bank are factored in, the total could reach 77 trillion naira ($167 billion), which is more than the GDP growth rate.
Although Nigeria’s debt to GDP ratio is only 23.2%, compared to Angola’s 60%, the proportion of revenue needed to service the debt is alarming, according to experts.
Moody’s downgraded Nigeria in January, citing the country’s economic performance. Some estimates put the cost of servicing debt last year at more than 100% of income.
According to Gregory Smith, emerging markets fund manager at M&G Investments, Nigeria’s “shockingly low levels of government revenue” also raise questions about its ability to spend to boost growth.
When asked about the government’s revenue shortfall, Smith said, “The debt pressures are symptomatic of that.
According to Smith, one of Tinubu’s top priorities should be increasing tax collection.
