FG’s debt service to revenue ratio in 2020 was 83% – Reports

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Factual Pursuit of Truth for Progress

 

 By Francis Ogwo

The Federal Government achieved a debt service to revenue ratio of 83% in 2020.

This was part of the contents in the budget implementation report of the government for the year ended December 2020 as presented by the Minister of Finance, Zainab Ahmed.

In the report, total revenue earned in 2020 was N3.93 trillion representing a 27% drop from the target revenues of N5.365 trillion.

However, debt service for the year was a sum of N3.26 trillion or 82.9% of revenue.

Nigeria’s debt service cost of N3.26 trillion has now surpassed the N1.7 trillion spent on capital expenditure of N1.7 trillion incurred in 2020.

This according to reports is the highest debt service paid by the Federal Government since the data tracking began in 2009.

The total public debt (External and Domestic) balance carried by Nigeria as of September 2020 stood at N32.22 trillion ($84.57 billion). Included in the total debt is a domestic debt of about N15.8 trillion.

The implication is that Nigeria’s debt to GDP ratio is estimated at about 22%, one of the lowest in the world and much below what is obtainable in most emerging markets.

However, the challenge has always been the debt service to revenue ratio, a metric that reveals whether the government is generating enough revenues to pay down its debts as they mature.

Since the first recession experienced in 2016, Nigeria has struggled with higher debt service to revenue ratio as revenues slid in direct correlation with the fall in oil prices.

Nigeria’s government spent about N2.45 trillion in debt service in 2019 out of total revenue of N4.1 trillion or 59.6% debt service to revenue ratio.

At 83%, 2020 ranks as the highest debt service to revenue ratio we have incurred. Before now it was 2017 with 61.6%.

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