The Debt Management Office (DMO), has addressed the recent concerns raised by the Lagos Chamber of Commerce and Industry (LCCI), relating to Nigeria’s debt service-to-revenue ratio.
President of the Chamber, Asiwaju Michael Olawale-Cole had 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.
He, therefore, said the government must review its borrowing parameters on the basis of the country’s debt-to-revenue ratio which, he said calls for concerns.
Addressing the LCCI chief, the DMO said Nigeria can lower its debt service-to-revenue ratio if it generates higher revenue like that of Ghana, Kenya, and Angola.
According to the debt office, while Nigeria has a revenue-to-Gross Domestic Product ratio of 9%, Ghana, Kenya, and Angola have a revenue-to-GDP ratio of 12.5%, 16.6%, and 20.9%, respectively.
A statement, in which DMO made this explanation, read: “The attention of the Debt Management Office is drawn to a recent report by the Lagos Chamber of Commerce and Industry, which stated that ‘staying within the current Debt-to-GDP threshold is an unreliable means of calibrating Nigeria’s current debt burden’. According to the Chamber, ‘the government must review its borrowing parameters on the basis of the country’s Debt-to-Revenue Ratio, which currently calls for concerns’.
“The Federal Government of Nigeria is aware of the country’s relatively high debt service-to-revenue ratio and has published the figures over the years, as well as included them in public presentations.
“The primary reason for the high debt service-to-revenue ratio is because Nigeria’s revenue base is low. Furthermore, the Government is largely dependent on the sale of crude oil, as a major revenue source. If Nigeria, with a revenue-to-GDP ratio of 9%, generated revenues close to countries such as Kenya, Ghana, and Angola with revenue-to-GDP ratios of 16.6%, 12.5%, and 20.9% respectively, then, its debt service-to-revenue would be lower.”
