ABUJA: Nigeria spent 1.94 trillion naira ($4.7 billion) to service its debt in the first four months of this year, higher than public revenue of 1.67 trillion naira generated during the same period, a ministry of finance document published on Friday showed.
Nigeria’s debt costs are usually below revenue. For decades, the country relied on oil revenue to fund its budget but crude output is at its lowest in years due to theft and vandalism of pipelines. An archaic tax collection system also means the government is unable to broaden its tax base.
The finance ministry’s Fiscal Strategy Paper dated July 21 showed that of total spending of 4.72 trillion naira between January-April, 1.94 trillion naira went towards debt servicing, the single biggest cost for the government.
That means for every dollar spent by the government, 41 cents went to paying debts.
Nigeria’s government revenue amounts to only 7.5% of its gross domestic product, among the lowest in the world, according to the International Monetary Fund. In sub-Saharan peers like South Africa it is above 20%.
Africa’s biggest economy is not generating enough revenue, analysts say, warning that the country will have to continue borrowing to repay its debt, leaving little to spend on health, education and infrastructure.
Total public debt stood at $95.8 billion at the end of 2021, giving a debt-to-gross domestic product ratio of 22.47%, still within the 40% limit set by the government.
But Central Bank of Nigeria Governor Godwin Emefiele earlier this week expressed concern over the sustainability of the country’s debt and urged the government to urgently diversify its revenue sources.