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Nigeria Spends Over 50% of Revenue on Debt

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  • Debt Servicing: Nigeria Spends Over 50% of Revenue on Debt

Nigeria’s rising debt remained a concern as more experts warn Africa’s largest economy of the danger involves in spending a large portion of revenue on debt servicing.

The African Development Bank said Nigeria spends more than 50 percent of her revenue on external debt.

In its ‘West Africa Economic Outlook 2019’ report, the bank said on the average, West African nations spent 17 percent of their revenue on external debt.

This, the bank said is high and even higher in Nigeria which spends around 50 percent on external debt servicing alone.

Foreign Policy, a magazine devoted to foreign policies/economics, last week tied Egypt current economic situation to poor infrastructure development due to the huge amount of money appropriated to the country’s foreign debt following the adoption of IMF economic reform programme about four years ago.

The situation is not entirely different from Nigeria, where the government spent N2.21 trillion on domestic debt alone in the first nine months of 2018. The amount is more than the N2.01 trillion allocated for total public debt servicing in the whole year.

According to the bank, with Nigeria’s domestic debt rising, the share of revenue spent on debt servicing will grow even higher.

The bank, however, added that even though Nigeria’s debt has risen by 128 percent in the last eight years, the nation’s debt to Gross Domestic Product remained low.

It stated, “Cape Verde had the highest external debt-to-GDP ratio in 2018, an estimated 103 per cent, followed by Senegal, Niger, and Sierra Leone. Liberia had the highest rate of debt accumulation between 2010 and 2018, at 329 per cent, followed by Nigeria at 128 per cent.

“Despite the increase, Nigeria still has one of the lowest external debt-to-GDP ratios, at 15.2 per cent. Benin, Guinea-Bissau and Togo also have a ratio below 25 per cent.

“The rapid increase in external indebtedness remains a challenge, especially given the shift toward non-concessional external debt. Debt service payments have also increased since 2010 and are projected to remain high in the medium term.”

The bank added, “The increase has heightened the fiscal burden in an already fiscally and growth-constrained environment. This raises important concerns regarding the sustainability of external debt. West African countries spend an average of 17 per cent of revenue on servicing external debt.

“In Nigeria, about half of the revenue is used to service external debt. The increasing domestic debt burden means that the total proportion of the revenue spent on servicing debt is even higher. In a country where only six per cent of GDP is collected in revenue, the high burden of debt service is a major concern.

“Ghana falls into a similar category, with debt service accounting for 40 per cent of revenue. The rising debt burden drove up to the proportion of revenue allocated to servicing external debt to about 500 per cent. This is a country once hailed as an example of a state with a strong commitment to structural and macroeconomic reforms in the post-Heavy Indebted Poor Countries debt relief initiative.”

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Economy

The Kenya Private Sector Alliance (KEPSA) and The Canada-Africa Chamber of Business Announce Major Memorandum of Understanding (MoU)

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The Kenya Private Sector Alliance and The Canada-Africa Chamber of Business are proud to announce collaboration to promote, support and facilitate bilateral trade and investment opportunities from Canada into Kenya.

The first engagement will be a virtual trade mission to Kenya from Canada in May.

The 3-year agreement MoU was signed today during the Second Session of the Binational Commission meeting between the Governments of Kenya and Canada – and is subject to ongoing renewal.

“This MoU will solidify the existing trade relations between Kenya and Canada and establish strong bonds between the two countries that will go a long way to boost private sector trade and investment. The MOU will also enable us to exchange business information with CACB which is critical especially to our members who wish to expand their coverage to international market,” explained Ms. Carole Kariuki Karuga, KEPSA CEO.

The Kenya Private Sector Alliance is the apex body of private sector in Kenya.

The Canada-Africa Chamber of Business is a 27-years old organization committed to accelerating trade, business and investment between Canada and Africa.

‘Nairobi is a vital gateway not just to Kenya and the region, but the continent’s economies of the future in Africa,’ noted Garreth Bloor, President of The Canada-Africa Chamber of Business.

‘KEPSA is world leader in the private sector, showcasing excellence on the global stage. This MoU is a great honour for The Canada-Africa Chamber of Business, our leadership, and all our members across Canada,’ says Deepak Dave, the organization’s long-standing representative in Nairobi and Chief Risk Officer at the African Trade Insurance Agency.

‘The joint intended results of the co-operation agreement between CACB and KEPSA seeks to increase two-way trade and investment between Canada and Kenya in all sectors – while laying the foundations to explore trade missions to Kenya by The Canada-Africa Chamber of Business and to Canada by KEPSA,’ said Sebastian Spio-Garbrah, Chair of The Canada-Africa Chamber of Business.

Guided by this MOU, CACB and KEPSA will work together towards on a case-by-case basis exploring events together, exchange of business information and reciprocity members of the Kenya Private Sector Alliance to enjoy the privileges of membership afforded to CACB members, and to ensure KEPSA members are well-positioned in the Canadian market for investment and trade in all sectors and that CACB members are well-positioned in the Kenyan market for investment and trade in all sectors.

“As KEPSA, we remain committed to establishing progressive business and trade partnerships with Canada and other similar minded parties for a mutual benefit of our members as well as those of our CACB counterparts,” said Ms. Carole Kariuki Karuga, KEPSA CEO.

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Economy

India, Spain, the Netherlands, USA, Nigeria’s Major Export Markets -NBS

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India, Spain and the Netherland top Nigeria’s export markets in the final quarter of 2020, according to the latest data from the National Bureau of Statistics (NBS).

The Commodity Price Indices and Terms of Trade Q4 2020 report showed that the United States and China trailed the three.

However, the NBS revealed Nigeria exports mainly crude oil and natural gas during the period under review.

It, “The major export and import market of Nigeria in Q4 2020 were India, Spain, the Netherlands, United States and China.

“The major export to these countries were crude petroleum and natural gas. The major imports from the countries were motor spirits, used vehicles, motorcycles and antibiotics.”

The bureau stated that the all-commodity group import index increased by 0.13 per cent between October and December 2020.

This was driven mainly by an increase in the prices of base metals and articles of base metals (one per cent), boilers, machinery and appliances; parts thereof (1.03 per cent), and products of the chemical and allied industries (0.75 per cent),” it stated.

The NBS, however, noted that the index was negatively affected by animal and vegetable fats and oils and other cleavage products.

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Economy

Onyeama: Qatar To Invest $5bn In Nigeria’s Economy

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The oil-rich state of Qatar is to invest a total of $5 billion in Nigeria’s economy, the Foreign Affairs Minister, Godfrey Onyeama, has disclosed.

Onyeama, who spoke Sunday at a send forth dinner in honour of Nigeria’s Ambassador-designate to the State of Qatar, who is also the outgoing Director of Protocol (DOP) at the State House, Ambassador Yakubu Ahmed, also stated that recent career ambassadorial appointments made by the gederal government was based on merit, experience and professionalism.

The minister further said there had been discussions with Qatar on partnership with Nigeria’s Sovereign Wealth Fund (SWF), for significant investments in the region of $5 billion in the Nigerian economy.

According to him, ‘‘Qatar is a weighty and strategic country and very strategic in that part of the world and we are putting our best feet forward to advance the interest of our country economically and in other areas.”

He recalled that President Muhammadu Buhari had visited the State of Qatar in 2016 and the Emir of Qatar, Tamim Bin Hammad Al-Thani, reciprocated with a State visit in 2019.

Onyeama also explained that only trusted hands with a track record of diligence, experience and professionalism in the Foreign Service were recently appointed career ambassadors by the federal government.

The minister said the appointment of Ahmed and other career ambassadors were predicated on posting dedicated and keen Foreign Service practitioners to serve as image makers of the country.

He said: ‘‘Ambassador Yakubu Ahmed is a dedicated professional with a penchant for rigour and detail. He is very capable and one of the best in the Ministry of Foreign Affairs. He is personable, affable, extremely friendly, dispassionate and objective.

‘‘He is going to head a very important mission, a very important country, reckoned to be one of the richest countries in the world, per capita, and there’s a lot we will be doing with the State of Qatar.”

Also speaking, the Deputy Chief of Staff, Adeola Rahman Ipaye, described the honoree as a ‘‘perfect gentleman, very even-natured and always well turned out’’.

Ipaye said he had no doubt that the newly appointed ambassador would serve the country well in Qatar, adding that: ‘‘We are further encouraged that when he completes this assignment, he would return to serve Nigeria in a higher capacity.’’

In his remarks, the Permanent Secretary, State House, Tijjani Umar, while congratulating the outgoing DOP on his appointment, lauded Ahmed for excellent service to the State House and the nation.

‘‘He served this institution and the nation with the deepest sense of responsibility and it is very important that we establish a tradition where the system appreciates those who have served it well and those who will continue to serve it well,’’ he said.

Umar urged the new envoy to keep very fond memories of his time at the Presidential Villa, assuring him of the prayers and goodwill of all the staff.

Responding, Ahmed thanked President Buhari for the great honour and privilege of making him his principal representative in Doha, Qatar.

The Ambassador-designate pledged to deplore his energy and skill to the promotion of the existing cordial relationship between Nigeria and Qatar, particularly in the areas of economic, political, cultural and consular affairs as well as other key areas.

Ahmed, who joined Nigeria’s Foreign Service in 1993, said during his years in public service he had learnt that ‘‘patriotism, selfless service, diligence, determination and perseverance will always result in the achievement of the desired objective’’.

According to him, these virtues would be his ‘‘watchword’’ in the pursuit of Nigeria’s foreign policy objectives and the attainment of national interests.

The Ambassador-designate singled out for appreciation the Chief of Staff to the President, Prof. Ibrahim Gambari, and the state Chief of Protocol, Ambassador Lawal Kazaure, saying he had learnt a lot working under their mentorship.

He expressed gratitude to the Minister of Foreign Affairs and the Permanent Secretary, State House for giving him the opportunity of a memorable work experience in the State House.

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