Nigeria spends more than 50% revenue in servicing debt, IMF declares

Nigeria’s debt profile has grown tremendously over the past few years that it now takes about 50% of the country’s revenue to service it. This shocking revelation was made by the International Monetary Fund on Thursday at the Regional Economic Outlook for Sub-Saharan Africa – Capital Flows and the Future of Work in Abuja.

The African Department official at the event, Amine Mati said that although Nigeria’s debt to GDP is relatively low at 20 to 25 percent, the country’s economy is growing at only 1.9 percent.

“Security issues are exacting a significant human toll in a number of countries. Debt to GDP ratio is increasing in the past five years. Public debt is diverting more resources towards debt servicing,” Mati said.

The burden of debt on the Nigerian economy far exceeds the ratio in other countries within the Sub-Saharan Africa region. The debt servicing allocation remains at 10 percent in the region against the high servicing price tag that hangs on Nigeria’s meagre revenue earnings.

With this high rate of debt burden, the government is still proposing to borrow more. The General Director of the Debt Management Office, Patience Oniha said it was imperative for the government to borrow in order to ameliorate the slow growth of the economy which was worsened by the impact of the recession that occurred between 2016 to 2017.

According to her analysis, the government borrowed N2.5tn in 2016; N1.64tn in the present financial year and is expected to borrow about N1.5tn in 2019. She concluded that the country has reduced the rate of borrowing now that the recession is over.

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Some advocacy groups have criticized the rate at which the government is piling up debt on the struggling economy. Vivian Bellonwu-Okafor of Social Action group said it was unfortunate that the government had no clue on how to improve the economic situation of the country without resorting to excessive borrowing.

Unless Nigeria is able to negotiate for debt forfeiture or seek a more sustainable means to pay off these debts, the cost of servicing it might become too difficult to bear.