Nigeria’s deteriorating oil revenue and rising debt profile have been a subject of discourse over the last one year. Data from the Debt Management Office (DMO) reveals that Nigeria’s total debt as of H1-2020 stood at N31.0trn and projected to rise to N32.5trn by Dec-2020.
Interestingly, Nigeria’s debt service to revenue ratio as of Q2 -2020 stood at 62.0% Assuming full receipts of the proposed budget revenue in 2021, debt service to revenue will beat 48% in 2021.
The outbreak of the COVID-19 pandemic revealed how volatile Nigeria’s main revenue stream is, and further worsened the rising debt profile as the government had to revise the 2020 budget, increasing the deficit to be able to fund the expenditure. The FGN has had to remove subsidies in the power sector as well as revise upwards the exchange rate conversion price for government agencies earning forex to improve the fiscal balance.
Actions taken by the fiscal authorities will improve non-oil revenue which is paramount. However, more effort needs to put into the non-oil revenue, creating infrastructure projects which would improve export competitiveness and improving transparency in interest sectors could drive government revenue.