Nigeria projected to spend entire revenue on debt in two years

Nigeria could spend more than its entire revenue on debt payment by 2025 if its current revenue levels do not improve, the Debt Management Office has said.

Nigeria’s total public debt stood at around N25 trillion or $103.11 billion by December. It almost doubled after the federal government added N23.7 trillion ways and means it drew from the central bank.

The debt office said the total public debt could this reach 37.1% of Nigeria’s gross domestic product (GDP), close to the government’s self-imposed 40% limit. The figure was 23.4% in September.

– Repaying the debt

The DMO said debt repayment may consume 73.5% of revenue in this year, above the recommended threshold of 50%. It will continue to rise and could reach 105.4% by 2025.

In an alternative scenario whereby the fiscal and monetary conditions and the general operating macroeconomic environment deteriorate, and the government fails to increase revenue, the ratio in 2023 alone could go as high as 142.3%, it warned.

“The projected FGN Debt Service-to-Revenue ratio at 73.5 percent for 2023 is high and a threat to debt sustainability,” the DMO said in a report. “It means that the revenue profile cannot support higher levels of borrowing.”

A high debt-to-revenue ratio means the government has less money to address developmental needs.

The debt office said attaining a sustainable debt service-to-revenue ratio would require an increase of federal revenue from N10.49 trillion projected in 2023 Budget to about N15.5 trillion.

President Bola Tinubu, who took office in May, has introduced reforms aimed at raising revenue and attracting foreign investment to the country. Yet, the measures have seen the cost of living rising steeply, affecting millions of citizens, over 60% who already lived in poverty.