Nigeria to Spend 24% of Revenue on Debt Servicing in 2016


By Goddy Egene

Nigeria is to spend 24 per cent of its revenue in 2016 for debt servicing, which is lower than the amount recent speculated.  The Representative of Islamic Development Bank (IDB), in Nigeria, Abdallah Kiliaki said recently that the country pays about 75 of its debt for debt servicing.

Kiliaki was quoted to have stated during a visit to the Chairman, Senate Committee on Local and Foreign Debts, Shehu Sani.

“When talking about unsustainable debt, it means that a country or a borrower is unable to pay. So, we take very that very seriously. When you look at the debt GDP ratio of Nigeria, it is very low. It is 17 per cent compared to Italy and other countries which is about 150 per cent, while that of the United States is about 100 per cent. But there is a caveat; it is true that debt to GDP ratio is low but when you look at the amount, the revenue to debt servicing ratio, the amount of money that the government is collecting, the revenue of the government vis-a-vis the ratio to the total debt, I think Nigeria pays about 75 to 80 per cent of its revenue to service debt,” Kiliaki had said.

Government agencies and some financial experts had faulted the statement of the IDM representative. However, THISDAY checks showed that in the 2016 Appropriation Bill passed   last week, about N1.48 trillion will be used to service debt, which is about 24 per cent of the total   budget. This is lower than the 32 per cent spent in 2015.

A Lagos based Financial Analyst,  Kingsley Ume,  who is Principal Partner, Astra Bold Investments Ltd  had decried the  tendency to  bandy  of statistics  capable of misleading  stakeholders, saying it is advisable to cross check properly.

 ‘’It is really unfortunate that people who should point the way for others are the ones who misrepresent the facts. It is inexcusable for a Representative of a global institution such as the IDB to claim that Nigeria spends 80 per cent of its revenue on debt service when the correct position is 32.1 per cent. One may be forgiven for thinking that  Kiliaki was merely being alarmist or trying to whip up sentiments about the state of the Nigerian Economy’,” he said.

The Managing Director of   International Monetary Fund (IMF), Christine Lagarde had expressed similar fear about the Nigerian Economy, warning Nigeria not to borrow. But analysts had faulted Lagarde’s comments.

  • RumuPHC

    The statement attributed to IDB is very correct!

    Nigeria will spend close to 80% of its 2016 collectable REVENUE on debt servicing.

    This is an extremely precarious situation that NOI under the last administration put Nigeria by borrowing from domestic sources to fund budget deficit when the nation was raking huge revenue at $100+ a barrel crude oil price.

    Revenue estimate for 2016 budget is entire different from the total expenditure estimate for the budget for the year . It is Mr Kingsley Ume that should cross check his facts and not IDB or foreign financial Instututions who see more clearly than most Nigerians.

    It is good we realize this and start working to reduce government expenditure and increase our tax base so that the problem is not compounded by taking more loans upon the erroneous believe that our GDP to debt ratio is low and better than most developed countries.

    • William Norris

      A rough figuring of the numbers…

      1.5 trillion for debt service in 2016

      6 trillion TOTAL budget * 2 trillion borrowed * Meaning REVENUE is about 4 trillion.

      1.5 / 4.0 gives the following % for debt servicing –

      37% of REVENUE and
      25% of TOTAL BUDGET

      With regard to NOI, don’t blame her alone, blame the Nigerian people too. President Jonathan warned you all in 2011 that continuing with the fuel subsidies will lead to economic collapse within 2 to 3 years.

      From Sun News Online

      Sunday, December 11, 2011
      -President Goodluck Jonathan, at the weekend, vowed to take the option of social revolt from Nigerians than back down on his plan to withdraw the subsidy on fuel.
      He said his insistence was informed by his knowledge that Nigeria’s economy will collapse in two years if the subsidy is sustained.

      The Nigerian treasury ended up spending at least $25 billion on fuel subsidies from Jan 2012 to Dec 2015.

      The present govt spent at least $2.5 billion for fuel subsidies in just 6 months of 2015.

      Then Nigeria is borrowing about $14 billion just this year.

      So blame those who forced Jonathan and Ngozi Iweala to continue with fuel subsidies.

      • RumuPHC

        Forget the optimistic figures for projected revenues contained in the 2016 Budget estimates.

        Part of the reasons individuals and nations like Nigeria get into high debt problem is by betting on unrealistic income when budgeting for expenditure.

        The 2016 budget revenue estimate is about N3.8 Trn . According to the budget office, only about N0.8bn will come from oil sales while N1.4trn is non oil revenue to be collected and another N1.5trn will come from another independent revenue source.

        Apart from the income from crude oil sales, how realizable are other revenue streams at a period when everyone claims the economy is down? How much of these was realized in 2015 and what is the likely inflow this year?

        It is all these considerations that all these Harvard trained financial experts at IDB and other foreign institutions would have taken into consideration before pronouncing that Nigeria will spend close to 70% of her revenue on debt service in 2016.

        In 2016, two things are certain when it comes to the budget: first is our debt servicing cost and the other is the total barrels of oil to be sold. Many other figures are mere projections. The less optimistic about such projections the better the result of any financial analysis and sounder the conclusion of the analyst.