Nigeria’s Debt Service to Revenue Remains High at 51% – DMO

• Nigeria’s Debt Service to Revenue Remains High at 51% – DMO

The Debt Management Office (DMO) has said Nigeria’s debt service to revenue generation remains higher at 51 percent.

The agency disclosed this in its Medium-Term External Borrowing Plan of the federal government released recently.

However, the nation’s debt stock to Gross Domestic Product (GDP) declined from 19.09 percent recorded on December 31, 2018 to 18.99 percent as at the end of June 30, 2019.

While this is positive for the economy, DMO explained that the nation’s weak revenue generation, when compared to nations like the United States of America and Canada with much higher debt stocks, remains an issue.

According to the DMO, “The United States of America, United Kingdom and Canada had debt/ GDP ratios of 105 percent, 85 percent and 90 percent in 2017 which were much higher than that of Nigeria, but because they generate adequate revenues, their debt service/revenue for the same year were 12.5 percent, 7.5 percent and 7.5 percent respectively.

“The case was also similar for Brazil, South Africa, Kenya and Mexico who had higher Debt/GDP than Nigeria (74 percent, 53 percent, 57 percent and 46 percent respectively), but had lower debt service/revenue of 32.20 percent, 11.4 percent, 13.2 percent and 13.6 percent respectively.”

“This is clear evidence that Nigeria’s revenues are low. This is further demonstrated by Nigeria’s tax to GDP ratio of only 6 percent in 2018 compared to: Kenya-15.7 percent, Morroco-21.8 percent, Cameroon-12.2 percent and South Africa-27.5 percent, all for 2017. These, attest to the fact that Nigeria has a Revenue challenge rather than a debt problem,” the DMO added.

Therefore, the debt office backed the government’s new borrowing plan of $30 billion, saying it would enhance infrastructure and expand economic productivity, which “will help to unleash the potentials of the Nigerian economy.”

“Other loans such as those for the educational sector will contribute to the development of Nigeria’s human capital, while loans for agriculture will be used to diversify the economy.

“There will also be funding for development finance institutions to enhance access to finance for micro, small and medium scale enterprises,” the debt office further said.