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Analysis: Nigeria needs an austerity diet

Why the Nigerian government needs to implement on Austerity Measures

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Analysis: Nigeria needs an austerity diet

Something strange happens on Saturday mornings on Bourdillion Road, Ikoyi, the UNILAG campus in Akoka, and Bode Thomas in Surulere is not exempted from this phenomenon.

If you look intently, you may observe it like David Attenborough filming the life of a baby elephant. Scores of differently sized people get on the road, some in lycra, some in garish pink, some in shorts, some on bicycles, and some with fanny packs.

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What are these people doing on the road? What do they want? Why would anyone wear reflective visors, 6 armbands, and ill-fitted long socks? It’s weight loss time, yeah! Excessive sugar is bad — it’s the work of the devil!

Chocolates, biscuits, and weight gain

You know deep down you shouldn’t eat these incredibly sweet things, but when you are down and tired, you can’t resist — it improves your mood. The World seems like a sweeter place suddenly, you smile a little bit, and you forget the problem.

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READ: Nigeria’s total debt to hit N33 trillion – Senate

However, you get another urge for more sugar and eat again. Your problem is still not gone, but you feel alright. With time, you realize that you have gained weight and must face the hard truth — cut down on sugar or choke on it.

If you choose the latter, five years down the line, your weight has grown from 75kilos to 225kilos — an additional problem to your worries. A person weighing 225kilos is super morbidly obese and may have many health problems.

The Nigerian government is in a similar situation, it has a weight problem, a large debt load attached to it that it simply can’t afford or ignore any further. It’s time to hit the road, change its diet, and consult with the doctor. In orthodox economics, countries getting on a diet and hitting the gym is called Austerity. Austerity is never a popular route for governments.

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In Fela’s classic, Teacher don’t teach me nonsense, he lamented about the pain of austerity and included it alongside other pains felt by the citizenry some 30 years ago. Whether we like it or not, government finances must be put on a diet; at best, a delay can ensue.

The longer the delay, the fatter the debt pile gets, and many more problems will emerge. People will feel even more pain without austerity. Austerity is not unique to developing countries, it is important to mention that in 2010, post the global financial crisis, the UK’s Chancellor of the Exchequer, George Osborne, introduced austerity measures on government finances to enable its future sustainability. This after all is an economically developed country mindful of its finances. If the UK government can do it, why not Nigeria? Could it be the do-it-yourself economic ideas?

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What does austerity diet involve?

A significant cut in government spending and largesse. It entails saying goodbye to the sweet-looking jeeps and furniture, the not so large civil service a.k.a government jobs, and to an ever-increasing attempt at collecting more taxes from poor Nigerians.

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Recall, more than half of Nigeria’s population is living below the bread line. It’s unclear from whom any tax increase will emerge. There is debate amongst orthodox economists about the timing of austerity diets — should it be during a crisis or during boom times? There is no clear-cut answer, but it’s easier to take the pain in a growing economy than one undergoing strain.

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It is sometimes possible to escape the diet. Some patients go for bariatric surgery and extensive liposuction and this helps them cut down in a very short space of time, without the attendant pain via the organic process. Nigeria did this in 2005 by securing debt forgiveness from the G8 countries to the tune of thirty billion dollars. Interestingly, this is roughly what Nigeria owes today.

Borrowing into unsustainable debts

It is unlikely anyone will cancel Nigeria’s debt again. So, why does the government keep borrowing when it’s apparent the country can’t afford it?

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Well, if one keeps getting cheap biscuits and chocolates, then it’s easy to eat more. Reviewing the basic debt stats can be deceptive without a good enough grasp of the stats for sustainable and non-explosive debt.

In my last article, I discussed how DIY economics or homegrown economic ideas have done damage to price stability in Nigeria. Without a critical review of how best to adjust an explosive debt path, countries are bound to stay the destructive course. Considering indicators used by George Osborne as a benchmark for Nigeria, Nigeria is on an explosive and unsustainable borrowing path.

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There is absolutely nothing wrong with leverage or borrowing. In many instances, especially with businesses and corporates, it helps them achieve their financial goals. However, there is a proverb from the South Western part of Nigeria that translates to, “one ought not to live an extravagant life, whilst in debt”.

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The statistics show that Nigeria continues to borrow extravagantly, without the impact being felt on the streets.

READ: 9 Brilliant ideas to pay off debt fast in 2021

What is the near term solution?

A selective increase in government revenue may be the way. Tax increase is highly unpopular but selective taxes on businesses that have benefitted from historical tax cuts and waivers may be the place to start.


This article was contributed by Dayo Oduwole. You can contact Dayo via his email, [email protected], or tweet at him @TheRealOladayo

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform.To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

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Nigeria’s high recurrent costs, low revenue and escalating debt numbers

Nigeria continues to face issues of poor revenue generation and a lack of will to efficiently manage its expenditure.

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Debt, Fitch downgradesS&P downgrades Nigeria, Nigeria’s credit rating faces downgrade by Fitch, Oil price crash, Coronavirus: The trouble that lies ahead for Nigeria, Avoiding 2016: What Nigeria should do to fight the coming economic storm, Fitch downgrades, federal government (FG)

In the recently released Q3 2020 debt report by the National Bureau of Statistics, the total public debt was N32.22trn as of 30 September 2020, with local debt making up 62.18% of the total public debt in the period while external debt made up 37.82%.

This is similar to the country’s debt structure in the same period of 2019 when domestic debt made up 68.45% of total public debt and external debt made up 31.55%. Whilst debt to GDP ratio remains within the acceptable threshold, we are increasingly concerned about the nation’s ballooning debt service to revenue ratio.

READ: U.S. budget suffers a deficit of $3.1 trillion in 2020, as pandemic slams the economy

Recall that the Federal Government of Nigeria following a series of revisions to the 2020 appropriation bill arrived at a fiscal deficit of N4.98trn. Based on the finance ministry data, an aggregation of debt monetization (N2.86trn) and New borrowings (N3.28trn) was used to finance the deficit.

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The 2021 appropriation bill forecasts a budget deficit of N5.60tn which would be financed mainly by borrowings of N4.69tn, privatization proceeds of N205.15bn and project linked bilateral & multilateral loans of N709.69bn. The country’s financing structure is of concern when one considers that the budget is tilted more towards recurrent expenditure than capital expenditure and raises questions on the sustainability of the current fiscal practices.

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The significantly higher recurrent component of the budget continues to drag the country’s economic growth, resulting in poor infrastructural development. Spending more on capital projects can promote industrialization, improve local purchasing power and help the federal government’s diversification drive.

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Nigeria continues to face issues of poor revenue generation and lack of will to efficiently manage its expenditure. No significant cuts have been made to its overheads and statutory spending has continued to rise. Nigeria’s growing debt stock with little to show for it in terms of capital expenditure remains a major concern.

READ: Nigeria’s total public debt stock increased by N2.381 trillion in 3 months


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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How Africa’s youth contribute to the African society

The growth of technology has created an opportunity for several African youths to come up with new innovations.

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Africa has been called a lot of names – dark continent, the savage, the continent of Safaris, third world, emerging market continent and more recently, Sh**hole, but it is hardly called the Continent of Youths.

It is not a secret that the youths are the future of the African continent. They are already emerging and will be the next thought leaders, creators and innovators that will help galvanize the African continent to greater heights.

According to the United Nations in 2015, Africa has 226 million youth aged 15-24 and one-fifth of the world’s youth population. This means that one out of every five youth on earth is from Africa. The African Youth population is forecasted to grow by 42% by 2030. There should be a new focus on the youth in Africa, as we examine how much they contribute currently to the continent.

One area where youth are thriving well in Africa is in the tech sector. The sector has become an interesting source of Foreign Direct Investments and in 2019 accounted for close to half a billion-dollar raked into the continent. In 2020, – the Paystack/Stripes deal brought in about 200 million dollars. The growth of technology has created an opportunity for several African youths to come up with new innovations, which are even more helpful in the current fledging economic and social climate affected by the pandemic.

There are several examples of many African youths using technology to start new ventures. Mike Endale, an Ethiopian American based in Washington, D.C, who is the principal at BLEN Corp, an information technology firm that leads the Ethiopia COVID-19 Emergency Tech Volunteer Task Team and assists Ethiopia’s Ministry of Health. During the pandemic, they have recruited over 1,700 software engineers and have even created an Africa COVID-19 response toolkit.

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Temie Giwa-Tubosun, the founder of LifeBank in Nigeria, is another African youth making strides in the tech scene. Since its establishment in 2016, it helps to deliver 22,830 units of blood, according to Next Billion, to hospitals in Nigeria, which help connect donors to blood banks. Next Billion also stated that LifeBank conducts drive through COVID-19 testing and supply oxygen to health centers. The Lifebank recently expanded in East Africa. In December 20280, the US- Africa Business Center of the US Chamber in conjunction with the American Business Council Nigeria in recognition of the great impact of start-ups in the wake of the Pandemic, inaugurated a digital entrepreneurship competition.

African youths are also thriving in the entertainment sector, particularly in the music business.  The Afrobeats genre continues to rule the music world and the likes of Burna Boy, Davido, Mr. Eazi and Omah Lay, who are still in their 20’s, spearhead and remain the face of the genre. The international recognition of Afrobeats has given artists more visibility on the global forefront. This was the case for Davido, Mr. Eazi and Tiwa Savage, who were featured on the cover of the Billboard magazine. Music remains of significant importance and the youths are a big factor to the success of the industry.

In Nigeria, the music revenue grew from $26 million in 2014 to $34 million dollars in 2018, according to Statista. The music revenue in Nigeria is expected to increase to $44 million by 2023 as reported by Statista.

Africa’s youth are also flying high in the area of sports, particularly in soccer. Wilfred Ndidi and Kelechi Ihenacho of Nigeria (both players at Leicester City in the English Premier League) come to mind. Also, Percy Tau, a South African soccer player, who was with R.S.C Anderlecht in Belgium, will now be returning to his parent club, Brighton & Hove Albion in the premier league. Tau plays in a forward position and he is expected to make his debut for the seagulls (Brighton & Hove Albion) in the 2020-21 season of the premier league.

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Lastly, youths in Africa have also been influential on the activism forefront, especially in the last couple of years. This was evident in October of 2020, when several Nigerian youths took to the streets to fight against police brutality in the End SARS protests. In Uganda, Musicians like Bobi Wine’s foray into Politics first as a parliamentarian and presidential candidate is attracting more youth to get into politics.

Other youths like Christelle Kwizera, founder of Water Access Rwanda, have been involved in helping communities with access to water. According to Global Citizen, Kwizera’s plan is to eradicate water scarcity and to provide clean water for people in local communities. Currently, her organization has supplied 70,000 people in Rwanda with clean water. Kwizera’s efforts earned her the Cisco Youth Leadership Award at the 2020 Global Citizen Prize.

African youths definitely have a lot to offer in several sectors and this would be vital to the growth of the continent. African governments need to understand this and invest meaningfully and in a sustainable way on the youth population to reduce the migration drain.

The enthusiasm, the work rate, and efforts are why the current children of Africa have an opportunity to be wonderful leaders of tomorrow. With the right nurturing environment in place, Africa’s future is in safe hands.

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Written by Paul Olele

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World Bank’s global outlook amid COVID-19 surge

The World Bank’s projection for Sub-Saharan Africa (SSA) is expected to grow by 2.7%, while the expected growth for Nigeria is set at 1.1% in 2021.

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Recently, the World Bank published its January 2021 global economic prospects. The bank expects global growth to expand by 4% in 2021 from an estimated 4.3% contraction in 2020.

In the report, the World Bank expressed concerns about the recovery phase of many economies, especially the emerging and developing economies except policymakers can put in place robust and comprehensive policy framework to improve the existing frail business and economic environment caused by the unprecedented coronavirus pandemic.

The bank’s growth projection for advanced economies (AEs) and emerging & developing economies (EMDEs) including China was 3.3% and 5.0% in 2021 respectively. Sub-Saharan Africa (SSA) is expected to grow by 2.7%, while the expected growth for Nigeria is set at 1.1% in 2021.

The World Bank appears less optimistic about the growth prospects across the globe including Nigeria as many countries are enfeebled as a result of the ripple effect of the pandemic causing elevated debt levels, rising unemployment and with the new strain of Covid-19 in many countries resulting in renewed lockdowns and restrictions, growth estimates may not be met. The bank stresses that quicker vaccination process across the world would aid faster economic growth which could step up to 5%, while a possible delay in rollout of vaccines amid rising infections could hamper growth expansion to 1.6% in 2021.

The prospect of quick vaccination appears a little bleak to us at this time. To give perspective, according to the Center for Disease Control (CDC) a few days ago, only 6.7 million Americans had received at least the first dose of the vaccine and that is roughly 2% of America’s population in 2 months.

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The bank extended its weakened optimism to Nigeria as the country faces severe pressures from dwindling oil revenues, weak private investments, eroding consumer spending power and declining foreign investor participation.

In our opinion, restoring the economy to the path of sustainable growth requires government’s conscious efforts in addressing structural challenges impeding growth in the economy.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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