Economy
Global debt hits $164trn—-IMF
International Monetary Fund has said that global debt hit a new record high of $164 trillion in 2016, the equivalent of 225 per cent of global GDP. Both private and public debt have surged over the past decade. High debt makes government’s financing vulnerable to sudden changes in market sentiment. It also limits a government’s ability to provide support to the economy in the event of a downturn or a financial crisis. It said that countries should use the window of opportunity afforded by the economic upswing to strengthen the state of their fiscal affairs. The April 2018 Fiscal Monitor explores how countries can reduce government deficits and debt in a growth-friendly way.
According to the IMF of the $164 trillion, 63 per cent is non-financial private sector debt, and 37 percent is public sector debt. Advanced economies are responsible for most global debt. Nevertheless, in the last ten years, emerging market economies have been responsible for most of the increase. China alone contributed 43 per cent to the increase in global debt since 2007. In contrast, the contribution from low income developing countries is barely noticeable.
Public debt plays an important role in rising global debt. Debt-to-GDP ratios in advanced economies are at levels not seen since World War II. Public debt ratios have been increasing persistently over the past fifty years. In emerging market economies, public debt is at levels seen only during the 1980s’ debt crisis. For low-income developing countries, average public debt-to-GDP ratios are well below historic peaks, but it is important to recall that debt reduction from earlier peaks involved debt forgiveness. Moreover, low-income developing countries’ debt climbed 13 percentage points in the last five years.
Along with debt, the cost of debt service has been rising rapidly in low-income developing countries. The interest burden has doubled in the past ten years to close to 20 percent of taxes . The escalating cost reflects in part the increasing reliance on non-concessional debt, as countries have gained access to international financial markets and expanded domestic debt issuance to nonresidents.
There are several reasons why high government debt and deficits are a cause for concern.
Countries with elevated government debt are vulnerable to changing financing conditions, which could hinder their ability to borrow, and put the economy in jeopardy. Furthermore, historical experience shows that high debt and deficits in a country increases the depth and duration of a recession—such as in the aftermath of a financial crisis—because governments are unable to deploy sufficient fiscal support to the economy, as discussed in the October 2016 fiscal monitor.
As growth gains momentum in most countries, fiscal stimulus to support demand is no longer appropriate. At the same time, fiscal multipliers, which measure the short-term impact of changes in taxes or spending on output, are expected to be smaller. This implies that the benefits from short-term fiscal stimulus are limited, and the economic costs of reducing debt and deficits relatively smaller. Reducing debt and deficits now will diminish a country’s vulnerability to changing market sentiment. It will also ensure that policymakers have sufficient resources to act in case of a downturn—precisely when fiscal multipliers are larger.
Overall, our forecasts indicate that debt-to-GDP ratios would come down over the next three to five years in most countries. But this hinges on countries delivering fully on their policy commitments. There is no room for complacency.
Of note, public debt ratios are forecasted to come down in all advanced economies, except for one. In the United States, the revised tax code and the two-year budget agreement lead to an expansion in the level of economic activity until 2020. These measures will give rise to overall deficits above $1 trillion over the next three years, which is more than 5 percent of GDP. This adds to the rising trend in government debt, bringing it to 117 percent of GDP in 2023. Our forecasts are qualitatively similar to those recently published by the congressional budget office.
In the April 2018 Fiscal Monitor, we urge policymakers to avoid fiscal policies that provide unnecessary stimulus when economic activity is already picking up. Instead, most advanced, emerging market, and low income developing countries should deliver on their fiscal plans, and put deficits and debt firmly on a downward path. They should also enact fiscal reforms that increase productivity and promote human and physical capital.
It is imperative that low income developing countries strengthen their tax capacity. This will allow them to service their debt. It will also allow them to finance spending priorities—such as health, education and public infrastructure—to attain the 2030 sustainable development goals. No one can predict the ebb and flow of countries’ economies. Prudent and successful governments prepare in good times to face the storms looming on the horizon.
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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