A Pan-African Credit Rating Agency and Industry Research Provider, Agusto & Co. Limited has stated that Nigeria’s revenue will increase by 15 per cent in 2022.
The rise in the federation account revenue, according to Agusto & Co. will be majorly derived from Value Added Tax (VAT) and Companies’ Income Tax.
This was mentioned in the agency’s report, titled ‘Nigeria in 2022’, describing the economic outlook of the present year.
It further explained that the Federal Government’s share of the revenues and its independent revenue would, under most aggressive estimates, be N5 trillion.
Also, to increase its funds for necessary spending, the Federal Government should be able to borrow another N8 trillion.
The report noted that about N11 trillion would go for obligatory spending (interest on loans, statutory transfers and payroll & unfunded pensions). While the larger part of the remaining funds would go to capital expenditure, which it summed up to be N3 trillion.
The Credit Rating Agency further estimated that Nigeria’s local currency debts will increase to N44 trillion this year.
In view of this, the Central Bank of Nigeria, CBN will lend to the Federal Government at rates below inflation to bring down its borrowing requirements and place pressure on interest rates at the market.
“Local currency debts of the FGN [Federal Government of Nigeria] will grow to about N44tn or about 9X of its revenues. The median for key countries in sub-Saharan Africa is about 2X.
“Because of the high cost of servicing these debts at commercial rates, the Central Bank of Nigeria will continue to accommodate the FGN by lending to them at rates below inflation, thus reducing FGN’s borrowing requirement from the markets and put a downward pressure on interest rates as banks, pension funds, insurance companies and other institutional investors compete for government securities,” it said.
Hinging on getting more investors to boost resources, it said the country’s risk premium is about 5 percent in 2022 as regards its outstanding debts.
“The average yield on FGN’s 10-year US$ bonds was 7.1 percent in 2021 compared to 1.4 percent for those issued by the government of the USA. This translates to a country risk premium of 5.7 percent. We believe that this risk premium will be about 5.0 percent in 2022 as fears about COVID-19 recede and the fact that Nigeria has ample resources to service its FCY debts. However, this premium may spike if there is a flight to safety by investors,” the report stated.
