IMF: Over 50% of Nigeria’s revenue is used to service debt

Amine Mati, International Monetary Fund (IMF) senior resident representative for Nigeria, says more than 50 percent of Nigeria’s revenue is used to service the country’s debt

He made the remark during a presentation by the International Monetary Fund (IMF) on the economic outlook for sub-Saharan Africa, stating that Nigeria was diverting more resources toward interests payments.

He said that although Nigeria’s debt to gross domestic product (GDP) was quite low, more than 50 percent of revenue went into interest payments.

He said increase in revenue is very important to bridge the gap to ensure that revenue to GDP is sufficient to pay up and service debt profitably.

The half-year activity report released by the Central Bank of Nigeria (CBN) showed that cost of debt servicing increased by 37.04 percent to N941.99 billion in June 2018, compared to N687.37 billion recorded in June 2017.

Also speaking at the event, Patience Oniha, director-general, Debt Management Office (DMO), said volatility in the international market affected Nigeria’s debt profile.

Citing an example, Oniha said a rise in US dollar interest rates had discouraged some foreign investors from putting their money in Nigeria.

She said the investors were “exiting and selling out” because of the rise.

Oniha said the federal government increased its level of external borrowing in 2017 and reduced domestic borrowing because it is cheaper to do so.

She said the nation is borrowing externally at fixed interest rates so as not to affect the debt portfolio already established.

She, however, noted that new borrowings may come at higher interest rates.