Nigeria records high debt revenue ratio

Nigeria records high debt revenue ratio
Photo by MOHD AZRIN- Ask Nigeria

The World Bank projects 102% debt service revenue for Nigeria.

Nigeria’s fiscal position continues to worsen as the cost of repaying debt exceeds the government’s revenue in the first quarter of 2022. According to the World Bank’s latest Africa’s Pulse report, a biannual analysis of the region’s near-term macroeconomic outlook, Nigeria’s public debt is alarming, with the debt service to revenue ratio potentially reaching 102.3 per cent by the end of 2022. Even at a low level (36.6%), public debt in Nigeria remains a concern as the country recorded a high debt service-to-revenue ratio (118.9%) between January and April.

The World Bank committed $7.93bn in the 2022 fiscal year, July 2021 to June 2022, this was an increase of 74.67% from the $4.54bn recorded in the 2021 fiscal year, July 2020 to June 2021. A total of $38.2 billion has been committed by the World Bank to Nigeria between 2018 and 2022. 2018 saw the largest commitment at $10.45bn throughout this time frame. Due to its increasing debt, Nigeria is now among the World Bank’s top 10 IDA debtors.

Nigeria plans to increase development with the IDA loan.

As of June 30, 2022, Nigeria has accumulated $13 billion in IDA debt stock, putting it in fourth place on the list according to audited financial accounts for IDA from the World Bank’s Fiscal Year 2022. Except for Nigeria, the top five have all reduced their IDA debt stock. It is anticipated that the IDA loan of $750 million would assist Nigeria in accelerating the execution of important initiatives that will enhance the climate in which businesses may thrive in individual states.

Shubham Chaudhuri, World Bank Country Director for Nigeria said in a statement that “Following the significant progress made by states on fiscal reforms through the State Fiscal Transparency, Accountability, and Sustainability program, the SABER program aims to offer similar support to the states to undertake critical business-enabling policies and institutional actions that will incentivize private sector development. He further emphasized that the private sector is still the primary driver of employment growth, state revenue growth, and improved economic and social response.”

High oil prices underperformed to increase revenue.

According to the International Monetary Fund (IMF) resident representative for Nigeria, Ari Aisen, by 2026, Nigeria’s debt service payments might consume as much as 100% of the country’s GDP. He discloses this in Abuja while delivering the group’s most recent Sub-Saharan Africa Regional Economic Outlook. In addition, the IMF predicted in February that Nigeria may spend 92.6% of its earnings on debt service in 2022. However, he warned that unless action was taken to reduce the country’s debt, the number will only rise.

Compared to the first quarter of 2022, yearly economic growth in Nigeria dropped from 3.6% to 3.4% in the second quarter. According to the research, higher oil prices weren’t sufficient to make up for severe oil production shortages due to some shortfalls including shut-ins caused by pipeline vandalism and crude oil theft, as well as high petrol subsidy costs due to higher landing costs of imported items. Non-oil taxes, on the other hand, fell short by a bit, averaging 92.6% of projections.

The government may receive a high increase in revenue.

Due to the increase in petroleum products subsidies, high oil prices do not reflect in government revenue. One of the greatest hurdles to achieving debt sustainability is the combination of poor productivity in the oil sector and unsustainable subsidies. The analysis predicts that if oil theft and pipeline vandalism are prevented, the revenue situation will improve in the second quarter of 2022. It was also noted that some non-oil taxes are seasonal, meaning that the government anticipates receiving a large increase in revenue as the year progresses. The debt service to revenue ratio is now over the nation’s aimed level, but with the anticipation of enhanced revenue collection, this ratio should be reduced.


Related Link

The World Bank: Website

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Ask Nigeria
1 month ago

Nigeria records high debt revenue ratio – The World Bank projects 102% debt service revenue for Nigeria. – Express your point of view.

SarahDiv
Member
1 month ago

Honestly I am tried of this Buhari administration. How can you have an increase in petroleum products and still have low revenue, how can you have Abacha loot and still borrow again. This country is gone because those who are in government are CHIEF LOOTERS

Adesanyaj72
Member
1 month ago

The combination of low levels of productivity in the oil industry and unsustainable levels of subsidy spending is one of the most significant obstacles to achieving debt sustainability.

Kazeem1
Member
1 month ago

The private sector is, and will continue to be, the dominant driver of employment development, expansion in state revenue, and improvement in economic and social response.

Godsewill Ifeanyi
Member
1 month ago

It is envisaged that the 750 million dollar loan from the IDA will aid Nigeria in speeding the execution of significant measures that will improve the environment in which businesses may flourish in individual states.

Chibuzor
Member
1 month ago

As a result of its ever-increasing debt, Nigeria has now joined the ranks of the top 10 IDA debtors according to the World Bank, which is a highly concerning development.

Hassan Isa
Member
1 month ago

The level of public debt in Nigeria is extremely concerning, with the debt service to revenue ratio having the potential to approach a high percentage by the year 2022’s end.

Taiwoo
Member
1 month ago

The level of public debt in Nigeria continues to be a cause for concern due to the fact that the government recorded a high debt service-to-revenue ratio between January and April, and a ratio of that magnitude is considered to be unfavorable.

Nwachukwu Kingsley
Member
1 month ago

As of the first quarter of 2022, the cost of Nigeria’s government repaying its debt would be greater than the country’s total revenue. This indicates that Nigeria’s fiscal situation will continue to deteriorate.

Tonerol10
Member
1 month ago

Congrats to Nigeria government for the debt. Government achievement is debt, since 2015 till date. APC is the worsen government we have ever had. Useless government with know plan

DimOla
Member
1 month ago

If this government is serious with paying off these debt they should cut down on the cost of governance and work on production and exportation rather than consumption. What we
have are selfish and brainless leaders in government affairs who only aim to syphon public funds.

Adeolastan
Member
1 month ago

Lack of proper planning and corruption is bedrock of Nigeria problem,if the so call major problems doesn’t attend to properly the debt increament will continue and Nigeria is going the wrong way entirely.

jdpumping
Member
1 month ago

Imagine see how much we will be using to service loan,Nigeria my country they keep borrowing money and the debt keep rising.

Iyanu12345ogg
Member
1 month ago

if oil theft and pipeline vandalism are prevented,
the revenue situation will improve. Also with enhanced revenue collection, this ratio should be reduced.

Haykaylyon26
Member
1 month ago

Nigeria debt is getting worse and thing need need be done so our revenue can increase so the debt can be pay all measure should be taking so the revenue can be improve such as oil theft and pipeline vandalism.

Ultra0711
Member
1 month ago

Nigeria’s public debt is really something to worry about. Where are all this debt been channeled to. Necessary measure should be taken before the issue worsen more.

theApr
Member
1 month ago

Nigeria’s fiscal position continues to worsen as the cost of repaying debt exceeds the government’s revenue in the first quarter of 2022. Nigeria’s public debt is alarming, with the debt service to revenue ratio potentially reaching 102.3 per cent by the end of 2022

Remi1
Member
1 month ago

The combination of low oil industry productivity and unsustainable subsidies is one of the biggest obstacles to achieving debt sustainability. According to the research, the revenue situation will improve in the second quarter of 2022 if oil theft and pipeline damage are stopped.

Abusi
Member
1 month ago

The extent of servicing this fuel subsidy is one of the cogent causes of our debt revenue deficit. If only we can remove the subsidy, our revenue will atleast try to meet up the debt we might have incurred.

Bola12
Member
1 month ago

It is envisaged that the $750 million IDA loan would help Nigeria speed up the implementation of significant initiatives that will improve the environment in which businesses can flourish in individual states.

Tolaniiii
Member
1 month ago

As of the first quarter of 2022, the cost of Nigeria’s government repaying its debt would be greater than the country’s revenue, which means that Nigeria’s fiscal position will continue to deteriorate.

Christiana
Member
1 month ago

It is the goal of the State Authorization and Budget Enhancement Reform (SABER) Program to provide similar assistance to the states so that they can enact crucial business-enabling laws and institutional actions that will encourage the growth of the private sector.