The Lagos Chamber of Commerce and Industry (LCCI), has lamented that Nigeria’s current debt-to-GDP threshold is not good, saying it’s an unreliable means of calibrating Nigeria’s current debt burden.
Speaking at the LCCI quarterly economic outlook press conference in Lagos on Tuesday, April 12, 2022, President of the Chamber, Asiwaju Michael Olawale-Cole noted that instead of the debt-to-GDP threshold, the government must review its borrowing parameters on the basis of the country’s debt-to-revenue ratio which, he said calls for concerns.
According to Olawale-Cole, the Federal Government spent N2.05 trillion on domestic debt servicing and N880 billion in 2021, and Nigeria’s total public debt as of December 31st, 2021 was N39.556 trillion, representing the total external and domestic debts of the Federal Government, 36 states, and the Federal Capital Territory (FCT).
His words: “With the total public debt stock to Gross Domestic Product of 22.47%, as of December 31, 2021, the debt-to-GDP ratio remains within Nigeria’s self-imposed limit of 40%. This ratio is prudent when compared to the 55% limit advised by the World Bank and the International Monetary Fund for countries in Nigeria’s peer group, as well as the ECOWAS convergence ratio of 70%.
“However, the Federal Government must be sensitive to, and mindful of the relatively high debt-to-revenue ratio of about 90% in 2021. We must initiate measures to increase revenues without jeopardising the existence of the businesses that pay taxes to the government.”
“We project that Nigeria’s debt stock and debt-servicing to revenue ratio will remain elevated in 2022. The Federal Government still plans to borrow an additional N1.6 trillion, while the 2022 debt target for domestic borrowing is N2.57 trillion.
“There is also a plan to borrow N2.57 trillion from foreign creditors, while N1.16 trillion is expected from multilateral/bilateral drawdowns. In total, the Federal Government plans to add N6.3 trillion new debts to the current debt stock, which would push the country’s total debt stock to N45.86 trillion by December 2022.”
