Economic analysts have called on the federal government to restructure the finances of Nigeria such that the share of the country’s revenue that goes into debt servicing is reduced to the barest minimum.
They also cautioned the government on the sustainability of the nation’s debt obligation.
Last year, Nigeria spent N1.797 trillion servicing its domestic debt and another $1.72 billion to pay interest on its external debts. Analysts say this may pose sustainability challenges for the country. As at December 31, 2018, Nigeria’s debt profile had risen by N2.66 trillion from N21.725 trillion as at December 2017 to N24.387 trillion. Close to 70 per cent of the 2018 revenue had been spent on servicing the nation’s debt.
According to Economist Intelligence Unit, there is need for structural reforms in the public finances. The EIU stressed the need for government to ensure debt sustainability over the long term by broadening the tax base to reduce the amount of revenue absorbed by interest payments.
On his part, chief economist and research fellow at the Securities and Exchange Commission (SEC), Professor Uche Uwaleke said while debt to GDP of the country remains one of the lowest in the world, debt servicing remains a major burden for the country.
“If you look at the size of our public debt, N24.3 trillion in relation to our GDP, is about 20 per cent. That is not a problem because even the World Bank and international agencies have a threshold of 56 per cent ratio of debt to GDP.”
He noted that while Nigeria still has room to borrow, “the real challenge is the fact that we don’t have enough revenue.”
Our revenue base is shallow and because of that the debt service to revenue is where the burden lies.
“We earn a dollar and we spend as much as 67 cents servicing debts. In 2017, we had 67 per cent debt service to revenue so that is where we have the challenge and that is why it is a burden. The international community are looking at that indicator not the other one in forming their opinion and that is why the International Monetary Fund is saying that our debt burden is becoming worrisome and I agree that debt servicing to revenue ratio is a challenge.’’
Managing director of Afrinvest Securities Limited, Ayodeji Ebo, said ‘‘what the country spends on servicing its debt is really worrisome and pathetic.’’
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