… urges governments to be proactive in detecting early signs of debt crisis
Nigeria is emerging from an unfavourable macroeconomic condition toward a more favourable and stable trajectory, but the country remains in a period of fiscal exhaustion with early warning signals of renewed debt pressures, according to the Nigerian Economic Summit Group (NESG).
Presenting the NESG’s Macroeconomic Stability Index and Debt Burden Index during the NES31 on Wednesday, Olusegun Omisakim, NESG’s Chief Economist, said the data reveal that while Nigeria’s economy is gradually improving, the country remains in a phase of fiscal exhaustion with early warning signals already appearing before further debt accumulation.
He explained that historical analysis revealed several phases in Nigeria’s debt trajectory from the 2005–2006 debt forgiveness, which was succeeded by debt acceleration and now fiscal exhaustion.
“Currently, we are at the apex and descending a little bit. The result shows the early warnings before we even see that manifesting in our debt accumulation”, he said.
The economist said this early-warning framework is critical for policymakers, as it helps identify signals for potential crises ahead of time, rather than relying on traditional indicators that only confirm problems after they appear.
According to him, the NESG’s earlier research across ECOWAS countries found that the most common fiscal ratios, such as debt-to-GDP, often fail to explain what happens before a crisis emerges. He charged governments to be proactive than reactive to strengthen policy implementation, enhance fiscal discipline, and improve forecasting.
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On the broader economy, he said the Macroeconomic Stability Index shows that Nigeria is emerging from an unfavourable phase and moving towards a more stable and favourable path. “We see the latest trend showing that we are coming up from an unfavourable path to a favourable path. Even though we are not yet there, the signal clearly shows that we are moving upward”, he said.
He further informed that the NESG research team began examining the issue of sovereign risk three years ago, prompted by persistent global and regional concerns about debt sustainability and fiscal resilience, particularly in Africa.
The goal, he explained, was to understand the early indicators of sovereign distress and how anticipating such signals could improve policy design and implementation.
“The world has been struggling with understanding debt burdens and fiscal sustainability. Africa’s case is unique, with persistent and systemic challenges in using debt meaningfully or repaying it sustainably. We asked ourselves: what if we could predict or understand the early signals of sovereign risk? What would change for policy efficiency and intervention?”
The findings show that while macroeconomic indicators can predict potential stress to some extent, the newly developed index provides more refined early-warning signals, he said.
“Our message is simple, to have a solid foundation for reform, we must strengthen how we detect early signals and respond before challenges escalate. This tool is one of the major steps toward solving some of the problems we are currently experiencing”, he said.
