‘Servicing debt with 60% revenue dangerous’

An economist at SPM Professionals, Paul Alaje, has warned that Nigeria’s servicing of debts with about 60 per cent of earned revenue may be dangerous and unsustainable.

The Federal Executive Council (FEC) recently approved to adjust the Debt to Gross Domestic Product (GDP) ratio from 25% to 40%. This means expanding the borrowing band at a time when the debt count is over N31 trillion.

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Mr. Alaje who spoke at a Finance Correspondents Association of Nigeria programme in Abuja said Nigeria must rethink its debt position as well as creatively expand its revenue profile.

“Making provision for further allowance in the borrowing limit is tantamount to sacrificing the near future in the hands of commercial creditors.

“At 25% of GDP, debt service was beyond 60% in 2020. Some states had beyond 90% of IGR. Are you worried? Unfortunately, our debts are no longer bilateral or multilateral in composition. Larger percentage of these loans, according to the Debt Management Office (DMO), is commercial in nature. How then will commercial loans be forgiven? Certainly not in the volume we owe. We should be ready to pay!”