Another edition of your favorite news updates.
- Nigeria’s looming debt crisis
Nigeria’s current debt stock stands at N19.6 trillion and our debt to GDP ratio is only 18.6%- that is our national debt is 18.6% of the value of goods and services that we produce. On the surface this does not sound alarming as it is one of the lowest levels in the world, however this article by the Financial Times reveals something that I had not previously considered. Typically, debt to GDP ratios are used as an indicator of how indebted a country is and its ability to service its debt, however this article, argues that the ratio is a poor indicator and I would explain why. We know GDP measures the value of all goods and services produced in an economy – both in the formal and informal sectors. However as we know, the government is only able to tax the formal sector and this is where the problem lies, Nigeria’s informal sector accounts for 65% of GDP, the highest in sub-Saharan Africa. So government can tax only about 35% of GDP, so it is this portion of GDP that we should truly be measuring debt against and when you do this our debt to GDP ratio sky rockets to 53.5%!!
Like I have always said, borrowing is not bad, especially for a country in recession, what matters more is what it is used for and the government’s ability to repay it. We need to be furnished with finer details and the plans that the governance has to expand its tax base.
- Nigeria’s alarming inequality levels
According to a new report by OXFAM and Development Finance International, Nigeria is last in a list of 152 countries ranked by their commitments to reducing inequality. Apparently, at least 86 million Nigerians live in poverty while Nigeria’s richest man earns 8,000 more than these poor people everyday. I have nothing more to add than to say that government has to be deliberate about increasing access to social and economic opportunities for all, it’s the only way, we can break the cycle of poverty.
It’s no news that Nigeria is notorious for corruption but perhaps these shocking details of how the former Minister of Petroleum, Diezeani Allison Madueke and her cronies embezzled funds shows just how bad it is. This once again reveals the need for a complete overhaul of Nigeria’s oil industry and the strengthening of institutions and laws which disincentivises this sort of behaviour.
- Jack Ma in Africa
Last week, Chinese Billionaire and Founder of Ali Baba visited Kenya and Kigali with 38 other Chinese billionaires. It was truly inspiring as he shared his experiences as an entrepreneur with young African entrepreneurs. As an inside, does it say anything about the difference in the way the East and West perceive Africa that Jack Ma came accompanied by 38 billionaires while Mark Zuckerberg came alone? Another thing, Have you noticed how Kigali, Rwanda is slowly becoming the ‘international conference’ capital of Africa?
Matters of Debate
- Does development have to come at the expense of freedom?
Any keen observer of African Politics will observe how within a relatively short period, President Paul Kagame has been able to transform his country’s narrative from one of genocide and hopelessness to one of hope and an example of the economic strides Africa can attain with focused leadership. Kagame has managed to increase the country’s per capita income from $150 in 1994 to $700 today, GDP growth rates have also averaged 8% since 2000.
However, beneath these gains is a ‘strong man’ who does not tolerate any form of dissent from the media or the opposition and where individual actions are closely monitored? This article by the Economist “Paul Kagame, Feted and Feared”, takes a deeper delve into these issues, read it and let me know what you think.
Things I am reading
- To be honest, my reading has suffered very much lately, So I am not really reading anything. However, this week, I hope I am able to finish reading the Mckinsey report on Chinese engagement in Africa
I wish you all an absolutely productive and inspiring week! Feel free to share your comments, thoughts and any interesting news/articles you see, I would absolutely love to engage with you.