Nigeria’s debt-to-revenue ratio ‘alarmingly high’, says FDC
While Nigeria has a low debt to GDP ratio of 34.4 percent, its debt to revenue ratio is alarmingly high at 99 percent, the Financial Derivatives Company Limited has said.
“This means that the government spends most of its revenue generated on servicing its debt, which could increase as interest rates start to rise globally and domestically,” analysts at the Lagos-based FDC, led by renowned economist Bismarck Rewane, said.
They noted that the Senate recently approved Nigeria’s external loan request of $2.7 billion targeted at financing the government’s fiscal deficit and meeting state needs and as a COVID-19 stimulus response.
“This is coming at a time when government revenues were down 12.8 percent in January. The loans will be sourced collectively from the World Bank, Export Import Bank of Brazil and Deutsche Bank of Germany and disbursed across the 36 states in the country to finance major projects,” the FDC said in a new report.
The approved loan is a concessionary loan which means low interest rates, according to the report.
“However, it will increase Nigeria’s external debt stock, which is currently at $86.39bn,” the analysts added.