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The Minister of Finance, Budget and National Planning, Zainab Ahmed, has said that the country intends to reduce its debt service-to-revenue ratio to 60 percent this year.
Ahmed stated this during an interview with Bloomberg TV on the sidelines of the World Economic Forum in Davos on Wednesday.
Recall that Nigeria recorded a debt service-to-revenue ratio of 80.6 percent in 2022 -a figure much higher than World Bank’s suggested 22.5 percent for low-income countries such as Nigeria.
The International Monetary Fund, IMF, had predicted that Nigeria may spend almost 100 percent of its revenue on debt servicing by 2026.
Commenting on the development, Ahmed while agreeing that the current ratio isn’t sustainable, said that the country is making effort to reduce its revenue spending on debt servicing to 60 percent in 2023.
She said, “Well, 80 percent is not sustainable and our plan is coming down to 60 percent in 2023 and how are we doing that? We are doing that by increasing revenues and by significantly reducing costs to enable us cope.
“There are some costs that we can pull back on, though not in the economy, but there are some costs that we must sustain such as provisions for education and health as well as infrastructure.”
However, Ahmed said the country’s debt trajectory is sustainable.
She added, “We are sustainable in our debt trajectory. We have made our plans to make sure we are able to consistently service our debts. And by the way, we are also exiting fuel subsidy, which is a huge cost. I am part of the contributors to where we are in terms of the debt stock.
“So, once we pull the first subsidy out, production of crude oil increases and then we sustain the improvements we have put in place in terms of non-oil revenue, then we should be able to come down to 60 percent debt-to-revenue.”