Nigerian President Muhammadu Buhari, who took office last month, said his government is facing severe financial strain from a Treasury that’s “virtually empty” and billions of dollars in debt.
The government is under “so much pressure” that it’s unable to even regularly pay some state workers, Buhari told reporters on Monday in the capital, Abuja. “This is the bad management that we find ourselves in.”
Buhari, who has yet to name a cabinet since being sworn in as president of Africa’s largest economy on May 29, is getting to grips with a more than 40 percent plunge in oil prices in the past year. The government under Buhari’s predecessor, Goodluck Jonathan, was forced to scale back budgeted spending and devalue the naira after foreign-currency reserves fell. The government relies on crude for about 70 percent of its income.
“It’s just saying the obvious,” said Akintola Owolabi, a senior lecturer of accounting and finance at Lagos Business School. “We all know about the reckless abandon with which the last regime carried out its affairs.”
The central bank has been using its foreign reserves, which fell to $29 billion as of June 18 from $34.5 billion at the start of 2015, to help defend the local currency. The naira has declined 7.8 percent against the dollar over the same period. It was trading at 198.95 against the dollar on the interbank market as of 3:37 p.m. on Tuesday in Lagos, the commercial capital.
A former military ruler, Buhari, 72, swept Jonathan from office in March elections by pledging to end endemic corruption and Boko Haram’s rebellion in the north that has killed thousands in its six-year campaign to impose its version of Shariah law.
Economic growth is forecast by the International Monetary Fund to slow to 4.8 percent this year from 6.3 percent last year.
Moody’s Investors Service said on Tuesday that while Nigeria’s low levels of foreign-currency reserves are limiting the nation’s debt rating, it doesn’t see lower oil prices causing immediate credit stress. Moody’s rates Nigerian debt at Ba3, three levels below investment grade.
“Nigeria has inherent credit strengths that underpin the Ba3 rating and the reason why we maintain a stable outlook there,” Matt Robinson, a credit manager at Moody’s, said in an interview in Kenya’s capital, Nairobi. “It has very low debt levels, but extremely low foreign currency denominated debt levels.”
Foreign debt stood at about 18 percent of total debt of $52.6 billion at the end of March, according to official data. Nigeria has “very significant scope” to increase borrowing in international markets if it needs to fund its budget, Robinson said.
Buhari on Tuesday pledged to recover funds lost through mismanagement and financial recklessness.
“There are financial and administrative instructions in every government parastatal and agency,” he said in a statement after meeting with state governors in Abuja. “But all these were thrown to the dogs in the past. Honestly, our problems are great, but we will do our best to surmount them.”