Nigeria, 10 Other ECOWAS Countries in Debt Crisis—Report

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Nigeria has been named in a new report alongside ten other countries in the Economic Community of West African States (ECOWAS) as having very serious debt problems.

The new report released by the Nigerian Economic Summit Group (NESG) and the Open Society Initiative for West Africa notes that countries are currently in debt distress based on debt sustainability analysis.

The other 10 countries are Benin, Burkina Faso, Cabo Verde, Gambia, Ghana, Guinea Bissau, Liberia, Niger, Senegal and Togo.

The report, titled “Debt Management, Restrictions and Sustainability in ECOWAS”, was recently launched at the Debt Management Office in Abuja.

According to the report, a financial crisis in Nigeria may threaten other countries in the ECOWAS region.

The report stated in particular: “According to the debt sustainability analysis, 11 ECOWAS countries – Benin, Burkina Faso, Cape Verde, Gambia, Ghana, Guinea-Bissau, Liberia, Niger , Nigeria, Senegal and Togo – are currently in a situation of over-indebtedness. However, the other four countries – Côte d’Ivoire, Guinea, Mali and Sierra Leone – present a low risk of debt distress.

“We also see that a financial catastrophe caused by a debt crisis in one country can spread throughout the region. Nigeria’s financial difficulties, in particular, portend a serious threat to other nations in the region.

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It was further revealed in the report that the accumulation of public debt in the region is unsustainable, and the need to address and avert the impending debt crisis is highlighted.

“As it emerges that the accumulation of public debt in ECOWAS has become unsustainable, countries must act quickly to avoid imminent debt distress. This is important for ECOWAS countries to avoid a lost decade from coming. to a debt crisis where debt settlement will be the government‘s only program for years to come,” he added.

The report further highlighted the high ratio of debt service to revenue in the region, especially in Nigeria.

The report said: “Beyond the debt figures, there are many indicators of the debt sustainability position (debt to GDP, external debt to GDP, debt service to revenue and a host of other ratios) in which the IMF has provided benchmarks. However, many countries have based their decisions on debt sustainability on debt indicators that allow for more borrowing.

“However, the debt service to revenue ratio has been a major challenge for debt management in ECOWAS – close to 100% for some countries. It is more precarious for Nigeria which recorded a 97% debt service to revenue ratio in the first five months of 2021.”

The report warned that the possibility of a debt crisis in Nigeria would have negative effects on public and private investments, among others, further affecting the entire region.

He added: “The situation where debt service to income ratio is close to or above 100% in some ECOWAS countries, as is the case in Nigeria, portends a cycle of borrowing indebtedness. to service the debt and risks a potential debt crisis.The possibility of a debt crisis in some countries of the region, particularly in Nigeria, will have negative effects on public and private investments, inflows foreign investment, aggregate demand and the stability of the macroeconomy as a whole.

“Following increasing economic integration among ECOWAS countries and Nigeria’s relevance in the economic structure of the region, the fallout from a debt crisis in Nigeria could have a destabilizing impact on other countries in the region. ECOWAS”.

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