ZAMBIA AND NIGERIA: A COMPARATIVE ANALYSIS, by Sina Olowookere

Zambia in 2020 became the first African country to default on its sovereign debt during the COVID-19 pandemic and struggled since then in protracted discussions to agree a deal.

The projects China financed however, took longer than the repayment timeframe to return revenue and socioeconomic value. Copper prices failing to reach estimated highs; and COVID-19 emergence in 2020, along with an ongoing climate crisis, meant Zambia faced severe challenges in paying back its loans.

In 2020, Zambia missed its first payment on US$ 42.5 million worth of Eurobond debt sparking the current debt crisis.
Zambia’s debt crisis is affecting its ability to collect tax

With debt servicing costs amounting to 30 per cent of the national budget, Zambia’s debt weakens the economy by forcing the government to spend money on interest payments when it should be spending on national development.
China is the largest official creditor to Zambia, with $4.1 billion owed to the Export-Import Bank of China alone, underlining the importance of Beijing’s support.

Our high levels of government debt have a negative impact on investment and borrowing in Nigeria. When interest rates are high, businesses and individuals are discouraged from borrowing, which slow down economic growth.

Debt can cause slow growth and deterioration of living standards by reducing the utilization of funds for essential spending areas such as healthcare, education, and infrastructure. As a result, the economy is more susceptible to economic shocks and financial distress.

In Nigeria, debt servicing has jeopardized the country’s economic growth and development. This weighs heavily on the economy, with consequences such as high inflation, unemployment, the majority of the population living under the poverty line and corruption

A debt crisis can lead to steep losses for banks, both domestic and international, potentially undermining the stability of financial systems in both the crisis-hit country and others. This can affect economic growth and create turmoil in global financial markets.

The Nigeria’s total public debt — federal and state governments — hit N49. 85 trillion at the end of the first quarter (Q1) of 2023. The latest figure increased by N3. 60 trillion from the sum of N46.27

The total debt burden of Nigeria or debt stock as at June 30, 2023, was N87. 38tn ($113.42bn). It comprises the total domestic and external debts of the Federal Government of Nigeria, the thirty-six states, and the Federal Capital Territory. “The major addition to the Public Debt Stock was the inclusion of the N22.15 Sept 2023

Bad debt can lead to stress by limiting your ability to enjoy life. Without a system to manage your loans and pay off credit card debt your stress can increase and take years off your life. Not to mention the constant stress debt collectors can place on you to pay off your debts.

The effects of a huge national debt on the economy of a country are
(i) It can reduce the availability of foreign exchange in the form of depleted foreign reserves. (ii) The servicing of a large internal debt will limit government’s ability to provide social capital and services for the people. (iii) A large domestic debt will influence the distribution of income in the country. I In summary, the debt burden of the country Nigeria is staggering and raises a lot of concern which the present government needs to handle properly and diligently enough to avoid another overturn. They have started in a better ny making some pronouncements as tothe fact that they will not borrow because of tje existiing huge debt burden but this government would probably need to mimd the rate at which political officers are being appointed. Tòo much of this would back fire, if these sets of appointees are not productive to cover three times their total emolument. Again is the quantum and volume of remuneration we have giving to our senators and house of representative members. This is huge when combined with their constituency allowances. But let us hope that the gains of the subsidy removal will not vanish like the windfall of the Gulf war did during the Babangida regime. Wishing Nigeria the best.

. Sina Olowookere writes