More and More Debts: A Concern for All

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Tuesday, August 17, 2021 / 10:11 PM / by CSL Research / Header Image Credit: BusinessDay

 

Recently, reports emerged that the Federal Government of Nigeria has hatched plans to borrow more in the bid to fill the deficit that its highly ambitious budget estimates would create for 2022. At a public hearing where this was culled, the Director-General, Debt Management Office (DMO), Patience Oniha, expressed concerns about the country's rising level of debt stock amid declining revenue. In her words, despite being conservative in the 2021 budgeted revenue, actual revenue still lags performance, an offshoot of the drag in oil receipts in the year. Thus, borrowings remain inevitable, pushing debt stock to new increasing levels with an attendant impact on the government's revenue position vis-à-vis debt servicing charge.

 

In recent times, Nigeria's debt profile has gained widespread attention, owing to slower growth in government revenue compared to the surge in debt stock. This development has further been amplified by the state of its cost to revenue ratio, one of the key indicators to assess debt sustainability. As of May 2021, the country's debt service to revenue ratio sat precariously at 98%, indicating that for every N1 earned, N0.98 was spent on debt servicing. Meanwhile, overheads and statutory spending have continued unabated, amid a growing infrastructure deficit. More worrisome also is the lack of a clear-cut direction on how it intends to efficiently manage expenditure, a sign of looming fiscal distress.

 

As of 31 March 2021, the nation's public debt stood at N33.1tn, and with further borrowings (FCY and LCY) by the horizon, we expect total debt stock at c. N38.4tn by 31 December 2021. As such, the country is facing another wake-up call on the need to diversify its earning sources via improved tax net and optimize collection process, extend, and concentrate more on tapping into other areas of the economy like tourism. Although, improving current macro conditions appears to be a silver lining in terms of improved accretion from the current earning sources, we reiterate our agelong clamor for the diversification of the nation's earning sources.

 

Proshare Nigeria Pvt. Ltd.


Proshare Nigeria Pvt. Ltd.

 

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  2. Nigeria on the Debt Precipice: Spent N1.8trn on Debt Servicing in First Five Months of 2021
  3. Q1 2021 Debt Data: Domestic Debt Service on a Plateau
  4. Q1 2021 Total Debt Figure: Moderate Risk of Distress Despite Rising Debt Level
  5. 37.67% of Nigeria's Total Public Debt Was External as of Q1 2021 - NBS
  6. Two-thirds of the FGN's External Debt Concessionary
  7. Q1 2021 Total Debt Figure: Moderate Risk of Distress Despite Rising Debt Level
  8. Public and FGN Domestic Debt Ratios under Control
  9. Nigeria's Total Public Debt Stood at N33.11trn as of March 31, 2021 - DMO
  10. Modest Burden of External Debt Service in Q4 2020
  11. A Rise in Domestic Debt Service in Q4 2020
  12. 38.60% of Nigeria's Total Public Debt Was External in Q4 2020 - NBS
  13. Q4 2020 External Debt Data: World Bank Heads the FGN's External Creditor List
  14. A Modest Increase in FGN Domestic Debt in Q4 2020
  15. Nigeria's Total Public Debt Stood at N32.92trn as of December 31, 2020 - DMO

 

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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