Nigeria’s Economic Productivity May Suffer With Rising Debt Servicing

The Organisation of the Petroleum Exporting Countries (OPEC) on Tuesday said Nigeria’s rising cost of servicing debt may slow down the nation’s economic productivity this year.

The cartel disclosed that the nation’s crude oil production declined from 1.76 million barrels per day in the first quarter of 2020 to 1.4 million barrels per day in the month of June.

In OPEC’s Monthly Oil Market Report released on Tuesday, OPEC noted that the nation’s public debt rose by about 15 percent year-on-year in the first quarter to $79.3 billion.

It said this was as a result of the surged in government borrowing from both domestic and foreign debt markets in recent months due to the decline in internal revenues and lower oil prices.

The oil cartel, however, stated that despite Nigeria’s debt-to-gross Domestic Product ratio remaining modest at just about 20 percent, the nation’s debt service-to-revenue ratio remains very high because of weak tax revenue model.

“As a result, debt servicing might limit the government’s ability to increase economic productivity, and the fiscal account may remain in deficit throughout the medium term,” the cartel stated.

Crude oil rose above $42 per barrel in July after plunging over 60 percent below its January’s price level. The global health crisis forced refineries and logistic companies across the world to shut down operations for months in order to curb the spread of COVID-19.

Despite global economies gradually reopening, energy investors are still wary of the second wave of the COVID-19 pandemic, especially in the United States of America. This, coupled with other economic uncertainties continue to weigh on commodity prices and economies of oil-dependent nations like Nigeria, Libya, Angola, etc.