Nigeria, Africa’s biggest economy, is “heading for bankruptcy” according to the former Central Bank Governor, the Emir of Kano, Muhammad Sanusi II.
Speaking on Tuesday he criticised government policy – particularly costly fuel subsidies – for stifling development and fuelling rampant poverty.
It sounds alarmist, but he’s right to worry. Growth has been anaemic in Africa’s biggest oil producer since the commodities slump, averaging just 0.95% since 2015. This is well below levels needed to drive meaningful development. Last year Nigeria overtook India as having the most people globally living in extreme poverty.
Investment has slumped, falling 43% to just $2bn in 2018. This is less than Ghana, an economy with 15% of Nigeria’s GDP. The drop is at least partly reflective of low confidence in the economic policies of president Muhammadu Buhari – recently re-elected – who presided over the country’s first recession in a generation in 2016.
Meanwhile the government is having to borrow to cover a widening deficit, which is fuelling a looming debt problem. Despite having a debt to GDP ratio of just 30%, two thirds of government revenue is going towards debt servicing.
Whether the country is “heading for bankruptcy” remains to be seen, but you’d have to be a dedicated optimist not to be concerned about Nigeria’s finances.
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