How FG's External Loan will Increase Nigeria’s Debt Profile, Financial Analyst Reveals

How FG's External Loan will Increase Nigeria’s Debt Profile, Financial Analyst Reveals

- Nigerians have expressed concern following the approval of fresh external loans for the country

- The head of research at United Capital Plc, Wale Olusi, noted that the loan will affect Nigeria’s debt profile

- In light of the government's continued borrowing, some experts warned that it is not healthy economically for the nation

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The federal government's move to borrow more money from external sources has certainly raised eyebrows among Nigerians.

Wale Olusi, the head of research at United Capital Plc said that the recent loan approval by the Nigerian Senate for the federal government will affect the country’s debt profile.

How FG's External Loan will Increase Nigeria’s Debt Profile, Financial Analyst Reveals
Nigerian Senate approved the sum of $1.5 billion and €995 million as external loans for the federal government. Photo credit: @NgrSenate
Source: Facebook

Recall that the upper legislative chamber on Wednesday, April 21, approved $1.5 billion and €995 million external loans for the government.

The loan was approved after consideration of the report of its committee on local and foreign debts on the external borrowing plan of the federal government at plenary.

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Olusi speaking exclusively to Legit.ng on how the borrowing will affect Nigeria’s debt profile said the government's move will create more burden.

He said:

"It will clearly increase Nigeria’s debt profile. There are no two ways about that. But that’s not the problem. Because we can still take more debt if you look at debt to GDP
The problem, however, is the burden, Debt service to revenue will further increase, thus mounting more pressure on FGN’s revenue which seemed to be certainly under pressure
So yes, agreed ! It will create more burden, but it’s a necessary burden sadly."

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Meanwhile, Legit.ng reported that Zainab Ahmed, the minister of finance, budget and national planning, said Nigeria has had to borrow more than it had planned before the COVID-19 pandemic started.

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The minister stated this in an interview on a daily breakfast show on the Nigerian Television Authority (NTA) monitored by The Punch on Monday, April 19.

Ahmed explained the federal government had to take the decision because it needed to still continue to invest in infrastructure despite the damaging effects of the pandemic on the economy.

Source: Legit

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