The United Nation (UN) has warned that Nigeria and other African countries face severe debt crisis in the wake of the coronavirus crises.
According to UN, the piling debts threaten to tip African countries into a rising wave of hunger, poverty, social unrest, conflict and economic stagnation.
A statement issued by the UN Department of Global Communications, on Wednesday, therefore advocated for an extension on the World Bank’s Debt Suspension Initiative (DSSI) until the end of June 2022.
DSSI initiative is intended to help countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people all over the World and is expected to end June this year.
The statement was jointly signed by Devi Palanivelu, UN Department of Global Communications; and Helen Rosengren, UN Department of Economic and Social Affairs.
It said, unless something is done to assist African countries, the high cost of borrowings will not just cause a further economic deterioration, but also force painful fiscal adjustments.
“the impact of the pandemic would be felt for years to come, unless smart investments in economic, societal and climate resilience were made to ensure a robust and sustainable recovery of the global economy”
Nigeria’s debt burden according to Debt Management Office (DMO) increased to N32.92 trillion in 2020 with foreign debt accounting for almost 40 percent.
“Except something is done the recovery of the economies of the developing world with catastrophic consequences for people’s lives, with an increase in hunger and poverty and dramatic problems with health and education systems, in many cases leading to instability, social unrest and, at the limit, conflict. Everything is now interlinked” the statement noted.
On Nigeria specifically, UN cited tighter foreign exchange liquidity, mounting inflationary pressures and subdued domestic demand as major challenges on its medium-term outlook.
Nigeria’s GDP according to the statement is expected to expand by 1.5 per cent in 2021, after a contraction of 3.5 per cent in 2020.
Yet, UN stressed that Nigeria, just as other African countries, elevated public debt will limit the capacity to boost spending across the continent which will help create jobs and engender the needed recovery.
“This meagre growth prospects meant less capacity to sustain debt levels, as foreign reserves, remittances and capital flows falter and depreciations constrain the capacity to service foreign currency-denominated debts.”
Hamid Rashid, Chief of the Global Economic Monitoring Branch at the UN Department of Economic and Social Affairs, and the lead author of the report, also stressed further on the need for sustained revival of growth in the continent.
“While a focus on the short term is essential, African countries need to lay the groundwork for a strong and inclusive development path in the medium term, which entails the creation of decent jobs at a large scale.”
“As countries will emerge from the crisis with higher levels of debt, a careful rebalancing of policy priorities will be required to build resilience and boost productivity.
“This includes unlocking growth opportunities and accelerating technology adoption and bridging digital divides, enhancing climate resilience and boosting domestic revenue mobilization,” Rashid said.