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Nigeria’s Debt Burden Worrisome May Stifle Domestic Investment – ADB President

………..by Ben Ndubuwa…….
The President of the African Development Bank (ADB) Group, Dr. Akinwumi Adesina has expressed worries over Nigeria’s current debt burden and how to service the debt and what this means for the nation’s resources for domestic investments needed to spur faster economic growth and development..

Speaking at the recent Mid-Term Ministerial Performance Review Retreat in Abuja, the ADB President said that the debt service to revenue ratio of Nigeria is high at 73 percent. “Things will improve as oil prices recover, but the situation has revealed the vulnerability of Nigeria’s economy. To have economic resurgence, we need to fix the structure of the economy and address some fundamentals” Adesina said.

He pointed out that Nigeria’s challenge is revenue concentration, as the oil sector accounts for 75.4 percent of export revenue and 50 percent of all government revenue.

“What is needed for sustained growth and economic resurgence is to remove the structural bottlenecks that limit the productivity and the revenue earning potential of the huge non-oil sectors.

“Here is the lesson: Nigeria should significantly boost productivity and revenues from its non-oil sector, with appropriate fiscal and macroeconomic policies, especially flexible exchange rates that will enhance international competitiveness” he said.

According to him Infrastructure is critical for unlocking the full potential of Nigeria’s economy. Nigeria will need $15 billion a year for investment in infrastructure.

“Financial innovations should be prioritized as governments alone cannot afford these huge financial costs. The private sector should be given incentives to invest in infrastructure.

The Federal Government’s 15 trillion Naira Infrastructure Fund is a good idea, so is the initiative for tax credits for private sector investment in infrastructure. To be sustainable and more efficient, Public-Private Partnerships (PPPs) should be accelerated to finance major infrastructure across Nigeria.

Nigeria’s institutional investors, especially the pension funds, should invest in infrastructure. Governments can also implement ‘Infrastructure Asset Recycling models, where existing infrastructure assets on government books can be turned over to the private sector, freeing up financing for governments to invest in new infrastructure needs.

“Here is the lesson: sustainable financing approaches such as PPPs and infrastructure asset recycling will allow Nigeria to attract significant private sector investment into infrastructure.

“This brings me to the issue of trade, investment, and competitiveness. The Africa Continental Free Trade Area presents a major opportunity for Nigeria. Consumer and business expenditures in Africa are projected to rise to $6.7 trillion by 2030.

Significant support should be directed toward boosting industrial manufacturing capacities. Nigeria should also move rapidly to the top of selected value chains, such as automobiles, computers and electronics, textile and garments, and food manufacturing, transport, and logistics.

“Much will depend on the ports of Nigeria. According to the sector operators, the cost of exporting 100 tons of cargo in Nigeria is $35,000, compared to $4,000 in Ghana. Today, the leading ports for West Africa are in Cote d’Ivoire, Ghana, Togo, and Benin Republic. All these countries have modernized their port management systems, leaving Nigeria far behind.

“Nigeria can learn from Morocco’s world-class Tangier-Med port. The port is unique in that it is an industrial port complex, and a platform that has over 1,100 companies. They collectively exported over € 8 billion worth of goods in 2020” he said.

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