Nigeria’s debt service to revenue high –Adesina

President of the African Development Bank (AfDB), Akinwumi Adesina has said Nigeria’s debt service to revenue ratio is high.

Adeshina who made the disclosure yesterday at the opening of a two-day mid-term ministerial performance review retreat in Abuja said Nigeria must “decisively” resolve its debt challenges to ignite economic growth.

In September, the Debt Management Office (DMO) said Nigeria’s total public debt (federal and state governments) climbed to N35.46 trillion at the end of the second quarter of 2021.

The AfDB president, however, acknowledged that the debt-to-GDP ratio remains “moderate”.

Adesina said economic resurgence is possible when Nigeria removes “structural bottlenecks” that limit the revenue-earning potential of non-oil sectors.

“Nigeria must decisively tackle its debt challenges. The issue is not about the debt-to-GDP ratio, as Nigeria’s debt-to-GDP ratio at 35% is still moderate. The big issue is how to service the debt and what that means for resources for domestic investments needed to spur faster economic growth,” he said.

“The debt service to revenue ratio of Nigeria is high at 73%. Things will improve as oil prices recover, but the situation has revealed the vulnerability of Nigeria’s economy. To have an economic resurgence, we need to fix the structure of the economy and address some fundamentals.

“Nigeria’s challenge is revenue concentration, as the oil sector accounts for 75.4 % of export revenue and 50 % of all government revenue.

“What is needed for sustained growth and economic resurgence is to remove the structural bottlenecks that limit the productivity and the revenue earning potential of the huge non-oil sectors.”

Hint at youth entrepreneurship investment bank

The AfDB also disclosed plans by the bank in conjunction with the Central bank of Nigeria to float a Youth entrepreneurship investment bank

He said: “We must move away from so-called ‘youth empowerment programs.’ The youth do not need handouts. They need investments.

“That is why the African Development Bank is currently working with Central Banks and countries to design and support the establishment of Youth entrepreneurship investment banks.”

He said the new financial institutions will be run by young, professional, and highly competent financial experts and bankers, to develop and deploy new financial products and services for businesses and ventures of young people. Adeshina said several African countries have already indicated their readiness to establish Youth Entrepreneurship Investment Banks.

“Nigeria should make its youth the drivers of the new economy through the creation of Youth Entrepreneurship Investment Banks, that put new financial ecosystems around them to fully unleash their potential.”