Nigeria To Spend 60% Of Revenue On Debt Servicing In 2023, Says Zainab Ahmed

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Zainab Ahmed, minister of finance, budget and national planning, says Nigeria plans to bring down its debt service-to-revenue ratio to 60 percent this year.

Ahmed spoke on Wednesday during an interview with Bloomberg TV on the sidelines of the World Economic Forum in Davos.

In 2022, Nigeria’s debt service-to-revenue ratio was at 80.6 percent — a figure far above World Bank’s suggested 22.5 percent for low-income countries like Nigeria.

The International Monetary Fund (IMF) had said Nigeria may spend almost 100 percent of its revenue on debt servicing by 2026.

Speaking on the issue, Ahmed said Nigeria plans to cut its revenue spending on debt servicing to 60 percent in 2023, adding that the current ratio is not sustainable.

“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,” she said.

“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.

“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,” she said.

“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.”

Asked if a lower debt service-to-revenue ratio will open up Nigeria’s bond markets, Ahmed said, “no, not 2023”.

“If we are able to get back to the rates of early 2021 then we can consider going back to the bonds market, but then we are consistently monitoring the bond market. We are monitoring the performance of our bonds. So, when you get to that comfortable level, we will explore it,” she said.