“Middle Income Economy” effect: Nigeria now plans to increase borrowing to 40% of GDP

Sometimes, impressions last longer than reality. A lot has been said since the World bank improved Nigeria’s standing from that of a poor country to a Middle Income Economy. Whilst there is an argument for that and against the impact is even more important. One of such impact is that as a middle income economy Nigeria can borrow as much as 53% of its GDP. Currently our borrowing as a percentage of GDP is about 25%. But in typical Nigerian fashion the Director General of the Debt Management Office (DMO), Dr Abraham Nwankwo has said that Nigeria will limit its to 40%. Hear him;

“We rather under borrow than over borrow. That is our rule, to be on the conservative side. Even though when countries were rated, our net present value to gross domestic product ratio has been reviewed to 56 percent, Nigeria advisedly will remain at 40 percent for practical purposes.”

Not that 40% of GDP limit for borrowing is bad but would this have been contemplated of we remained a poor country??

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===>> FG pegs borrowing at 40% to GDP ratio