Heavy debt load chokes Africa’s biggest economy

Nigeria has now joined the list of countries that are battling crippling debt. Africa’s largest economy is looking for measures to manage its liabilities as a result of falling oil production and rising debt payment costs, which are expected to hit 102% of income this year.

According to Finance Minister Zainab Ahmed in an interview with Bloomberg TV, the government has hired a consultant to determine how it might reprofile its debt and “stretch out the repayments to longer periods.”

Nigeria is not the only country looking to restructure; Ghana is also trying to figure out how to renegotiate its responsibilities, as are Zambia, Ethiopia, and Chad. Additionally, global causes like the escalating cost of food brought on by Russia’s invasion of Ukraine have put pressure on economies all around the world.

Nigeria’s situation, however, is largely one that it created. Despite repeated calls from leaders to end an unjustified fuel subsidy, the state will lose roughly $12 billion to the programme this year, money that might have been used to pay for projects that it borrows money to fund.

With production now less than half what it was in early 2020, the government cannot benefit from increased prices after failing to bank billions of dollars in oil income during decades as the continent’s top producer (Nigeria has almost no refining capacity).

Investors responded to the news quickly. Six of its bonds are currently in what is commonly referred to as a troubled area, though prices began to rise again after the minister emphasised that the money of all bondholders is secure.

Trying to reschedule its payments comes at a difficult time for Nigeria, despite Situmbeko Musokotwane, Zambia’s finance minister, arguing in a different interview that other African countries should follow its lead and act promptly to restructure debt.

Trying to reschedule its payments comes at a difficult time for Nigeria, despite Situmbeko Musokotwane, Zambia’s finance minister, arguing in a different interview that other African countries should follow its lead and act promptly to restructure debt.