MAN, LCCI to FG: Rising debt threatening economy

The Lagos Chamber of Commerce and Industry, LCCI, the Manufacturers Association of Nigeria, MAN, and economy analysts have warned the Federal Government over the rising debt profile and the deteriorating state of the economy, saying they were problematic to economic development.


While LCCI noted that the nation’s debt profile had become a problem in the face of its dwindling revenue and unsustainable burden of subsidy payments, MAN stated that economic mismanagement might result in major manufacturing job losses, given the rising cost of production and other factors.

They called on the Federal Government to adopt measures to increase the country’s revenue and borrow from cheaper sources to ameliorate Nigeria’s debt portfolio.

LCCI president, Dr Michael Olawale-Cole, who gave the advice in Lagos yesterday, said most recent statistics on government revenues showed poor performance and mounting government costs, making it evident that Nigeria is going through a debt crisis.

He noted that aggregate expenditure for 2022 was estimated at N17.32 trillion, noting that at the end of April, revenue of N5.77 trillion was expected, while only N1.63 trillion was realised as government’s retained revenue.

Olawale-Cole added that within the same period, government’s actual spending stood at N4.72 trillion, including N1.94 trillion on debt servicing, N1.26 trillion on personnel costs, leaving only N773.63 billion for capital expenditure.

He said further that the country’s total public debt stock rose from N39.56 trillion in December 2021 to N41.60 trillion by the end of the second quarter of 2022, as revealed by the Debt Management Office, DMO.

He warned that the borrowings are significantly increasing, and that Nigeria was struggling to service the debts due to revenue mobilisation challenges and an increased fuel subsidy burden.

These developments, the LCCI President said, are disturbing, seeing that debt servicing alone was higher than actual retained revenue in the first four months of the year.

‘MTEF 2023-2025 will be missed’

“There are already concerns that most, if not all, of the assumptions in the Medium-Term Expenditure Framework, MTEF, 2023-2025 will be missed as we continue to experience unprecedented levels of disruptions to supply chains and agricultural production.

“The 2022 budget assumptions have already fallen short in terms of inflation, exchange rate, and GDP growth rate and all of these assumptions have become inadequate.

“Nigeria’s Debt-to-GDP ratio now stands at 23.27 per cent, as against 22.43 per cent on December 31, 2021.

“On the path of caution, we urge the Federal Government to discontinue this unsustainable pattern,” he said.

Olawale-Cole acknowledged that the level of insecurity in the country had prompted increased spending on defence and security, adding that the deteriorating security situation in the country had also battered investors’ confidence and affected foreign exchange inflows into Nigeria.

The LCCI boss noted that with the high component of Eurobonds as part of external debt, the current weakening of the naira signified an exchange rate risk likely to put pressure on inflation and its attendant consequences.

He said:   “Nigeria is the only major oil exporter that hasn’t benefited from the windfall of higher global oil prices.

“The International Monetary Fund, IMF, has warned that debt servicing may gulp 100 per cent of the Federal Government’s revenue by 2026 if the government fails to implement adequate measures to improve revenue generation.

“In the face of rising debt servicing costs accompanied by a dwindling revenue, the provision of critical infrastructure and amenities like healthcare services, education, power, roads, and security will be hard hit as funding shrinks,” he said.

He noted that recently, the Debt Management Office, DMO, listed N250 billion Sukuk on the Nigerian Exchange Limited, NGX, as an alternative financing source to bridge the infrastructure gap in the country.

He said the issuance and subsequent listing of the Sovereign Sukuk on the NGX platform aligned with the chamber’s persistent call for cheaper government financing away from debts by leveraging innovative and cost-effective revenue sources.

Olawale-Cole added:  “The chamber has consistently advised the government to borrow from cheaper sources and consider deficit financing from equity instead of the expensive debts borrowed and used for recurrent expenditures.

“The commercialisation model proposed for NNPC Limited is the right direction to go.  Once this plan succeeds next year, it should be replicated with other national corporate assets scattered across the country.  Nigeria must manage its debt burden to avoid further pressure on revenue.’’

He said it was also imperative that more spending was needed in supporting productive infrastructure instead of spending borrowed money on subsidising consumption.

Manufacturing job losses imminent – MAN

On his part, the Director General of Manufacturers Association of Nigeria, MAN, Mr Segun Ajayi-Kadir, said the worsening economic situation was impacting manufacturers negatively, leading to depletion in working capital, reduction in capacity utilization, with possible labour force right-sizing to follow.

His words: “The information from MAN members equally indicates that the production capacity utilization has been going down because of the unsustainable cost of running daily production on diesel.

“The direct implication of this trend, as many Nigerians are already feeling the heat, is the reflective high cost of goods in the market, owing to the high cost of production.

“Making the matter worse is the inadequate energy supply for the manufacturing sector from the national grid. It is on record that more than N100 billion is expended per year by our members on alternative energy sources which constitute between 30% and 40% of their cost structure.

“The implication is that our cost structure is thrown overboard; our working capital will be depleted by this one cost item, our capacity utilization will nose-dive since we cannot run as many shifts as we normally do, we may have to right-size to fit our production profile.

“Since the average Nigeria’s disposable income has been depleted, we can only expect that the resulting higher prices of goods will further constrain purchases and aggravate the poverty level.”

Mounting foreign debt may be difficult to service – Adonri

Analyst and Vice Executive Chairman, Highcap Securities Limited, David Adonri, said : “The alarm raised by LCCI and Nigerian Employers Consultative Association, NECA,  on impending collapse of the Nigerian economy is justified.

“Whether from the angle of public debt, energy crisis, forex illiquidity, insecurity or distressed production, the economy is in a very bad shape. We are in a very precarious and extremely delicate situation. I fear for the consequences this situation may precipitate if urgent emergency rescue measures are not taken.’’

Commenting on Nigeria’s rising debt profile, Adonri said: “Both externally and internally, government has taken and is still taking more debt. This is increasing the risk of sovereign default and economic nightmares.

“The hard currency earning capacity of Nigeria may also not be sufficient, now and in near future, to enable government service the mounting foreign debt.

“Internally, the borrowing has now reached the alarming point of crowding out the productive real sector. This poses grave danger to the capacity of the real sector to create wealth and generate productive employment.

“In every capitalist economy like ours, government has primary obligation through policies and actions to prevent any crowding out effect and to ensure larger capital formation by the private productive real sector.

“Excessive borrowing by this government at the expense of the private sector which is the engine room of the economy, brings to question the soundness of their economic strategy.

“The careless use of debt as a financing tool is fraught with calamitous dangers. Even more disheartening is when the debts are principally used to finance consumption or to unwisely finance few secondary infrastructure (roads and rail).

“These will neither enhance the productive momentum of Nigeria’s light industries nor make the economy self-reliant. The disorderly growth of the economy this administration is pursuing can only mislead the country into an abyss, if public borrowing is not curtailed to lower cost of funds so that production will be competitive.”

Bleeding economy may trigger recession – Kurfi

In his view, analysts and Chief Executive Officer, APT Securities & Funds Limited, Mallam Garba Kurfi, said: “The NECA and LCCI may be right in view of the way they look at the economy. There is no doubt that the cost of energy, especially diesel, which is used to power our generators is on the high side, particularly when banks are closing their branches earlier because they cannot afford the cost of diesel.

“The cost of FX in the parallel market, as high as N720/ $, is making it difficult to source foreign exchange, FX, aside the cost, are issues of much concern.

“However, the indicators of the economy are not that bad because there is still growth in Gross Domestic Product, GDP. Despite bleeding, the economy may not go into recession.’’


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