Nigeria spends 85.5% revenue to service $94.17bn debt



The International Monetary Fund (IMF)’s 2021 Article IV estimates that giant of Africa, Nigeria spends 85.5 per cent of total revenue to service its total deb of $95.17 billion in 2021. But worrisome part of the scenario is that its peer country, South Africa spend a mere 20 per cent to service it much bigger debt of $261 billion during the same period.

The implication is that, for every N10 Nigeria makes as revenue, over N8 is used in servicing the debt leaving less that N2 to run the country. On the other side, if South Africa makes 10 Rand as revenue, it uses two Rand in servicing debt and still left with a hefty eight Rand to run the country.

The brings to the fore, the expertise, experience the Nigerian negotiators have compared to their brothers in South Africa.

Nigeria is the continent’s largest economy. Latest estimates by the National Bureau of Statistics put the nation’s economic size at $420 billion. On the other hand, South Africa is second largest economy on the continent with an estimated size of $320 billion.

Analysts say Nigeria’s debt service is very expensive because of the perception of investors of the country as high risk.

The Chief Executive Officer of Centre for the Promotion of Private Enterprise, CPPE, Dr Muda Yusuf, said that debt service ratio was a function of the magnitude of the debt and its cost.

“If the amount you are borrowing is high, you also have to pay more. Also, Nigeria borrows at expensive rates, especially the Eurobonds. Sometimes, we celebrate that our Eurobondsare oversubscribed, but the yields are very high when you compare them with other countries,” Yusuf said.