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Nigeria faces economic headwinds from rising debt and inflation, says the United Nations

Rising public debt, high inflation, increasing costs of living, and difficult business conditions will continue to pose risks to Nigeria’s economic growth prospects, according to a new United Nations report.

The UN’s “World Economic Situation and Prospects 2024” forecasts Nigeria’s GDP growing to 3.1% in 2024, helped by recent government reforms, especially in oil and gas. However, major downside risks remain.

These include ballooning government debt, ongoing high inflation, rising living costs, and an unfavourable local business climate. The UN also warns that most African economies will battle heavy inflationary pressures in 2023, pushing up food prices.

In Nigeria, Egypt, and Ghana, food inflation stayed above 30%. Deteriorating fiscal positions, combined with already high debt loads and low domestic revenue bases, confronted many African governments. Weak taxation systems and frameworks hamper fiscal reforms.

Tax revenues average 16.6% of GDP in Africa, lagging Asia Pacific’s 21% and Latin America’s 22.9%. Reforming fuel subsidies and raising taxes provided some relief for tight budgets in Nigeria, Angola, Gambia, Kenya, Ghana, and South Africa.

However, unpredictable commodity prices and external shock risks contribute to regional fiscal uncertainties. African borrowing costs have increased as credit ratings declined, limiting affordable capital access. The UN estimates that African countries pay four times more than developed nations to borrow.

Recent downgrades in Nigeria, Ghana, Egypt, Kenya, and Morocco exacerbated the problem. The African Union seeks to establish independent credit rating approaches to lower borrowing expenses.

Debt stresses, lasting inflation, and climate risks—along with political uncertainties—continue to cloud Africa’s macroeconomic future. Food insecurity persists as well, says the UN report. It names Africa as having 60% of the world’s moderately or severely food-insecure people.

Nigeria’s total public debt rose significantly through 2022. Officials warn rising debt across all tiers of government now threatens national economic independence.

The IMF projects high inflation will slow real Nigerian growth to just 2.9% in 2023 and 3.1% in 2024 via reduced consumer demand.

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