- Advertisement -spot_img
28.2 C
Lagos
HomeBusinessNigeria risks debt sustainability issue as debt stock hits N35.5 trln in...

Nigeria risks debt sustainability issue as debt stock hits N35.5 trln in Q2 2021

- Advertisement -spot_img

Nigeria’s debt stock rose 7.75 percent year-to-date to N35.5 trillion by end of June this year, said the debt office, but warned that the country risked the debt sustainability issue if it failed to grow the current low revenue profile.

The country’s Debt Management Office (DMO) report showed that Nigeria’s exernal debt constituted 38.7 percent at N13.7 trillion while domestic debt stood at N21.8 trillion as of June 2021.

In a virtual chat on Wednesday, the Director General of the debt office, Patience Oniha warned that the country risked the debt sustainability issue if it failed to grow the current low revenue profile, which places the country in the poorest category among its peers.

“We should focus on revenue. The good thing about it is that the Minister of Finance, Budget and National Planning has started a programme aimed at growing the revenue profile. We must discipline ourselves to follow through to grow our revenue.

“If we continue to borrow and do nothing about growing our revenue base as other countries have done, we may have a debt sustainability challenge,” she said.
Oniha, who did a pair-wise comparison of national tax to gross domestic product (GDP) of 11 countries as of 2019, noted that Nigeria is among the countries with the least ratio globally.

The selected countries were the United States, United Kingdom, Brazil, South Africa, Kenya and Mexico. Others included Canada, Morocco, Ghana and Angola.

READ ALSO: Nigerian banks lack enough dollar liquidity to fund Shell Petroleum divestment from onshore assets ~GTB Boss

While South Africa had the highest tax to GDP of 26.7 per cent, Nigeria sat at the bottom with 5.68 per cent. Angola, which came after Nigeria from the bottom, recorded 9.4 per cent tax to GDP.

Oniha said it was important to interrogate the reasons the country’s huge GDP has not translated to revenue, and that it was time the authorities aggressively pursued income-yielding policies.

She disclosed that the country’s debt to GDP remained considerably low at 21.92 percent, up from 21.61 percent last year.

However, she said it could increase to 35 percent when the Ways and Means Facility (WMF), that is, overdrafts with the Central Bank of Nigeria (CBN), is added to the debt stock.

Oniha said it was important to interrogate the reasons the country’s huge GDP has not translated to revenue, and that it was time the authorities aggressively pursued income-yielding policies.

She said the current value of the WMF stood at N10 trillion at the beginning of the year, suggesting that the figure could be higher as of the end of June this year.

The International Monetary Bank (IMF) Fitch Ratings had warned the government over regular recourse to WMF for deficit monetisation in recent years, saying it was a major cause of rising inflation and fiscal instability.

Oniha admitted that the country’s external debt has currency volatility risk but noted that Eurobond has helped to “put Nigeria on the international financial market” and increased the external reserve position.

She added that “sourcing loan from the local market will be crowding out the private sector, hence the resolve to look outside,” even as the debt servicing to revenue stood at 43.2 per cent as of 2019.

Join Our Mailing List!

* indicates required
- Advertisement -spot_img
- Advertisement -spot_img
Must Read
Related News
- Advertisement -spot_img