The IMF, which stated this in its World Economic and Financial Surveys, also projected that by the end of 2017, the country’s current indebtedness would have reached 23.3 per cent of the GDP.
The country closed 2016 with a debt to GDP ratio of 18.6 per cent. By the end of 2015, Nigeria’s debt to GDP ratio stood at 12.1 per cent, according to the Bretton Wood institution.
Nigeria’s GDP for the year ended December 31, 2016 stood at N67.98tn, according to the National Bureau of Statistics.
Going by the projection of 24.1 per cent for 2018, it means that within three years, the nation’s debt to GDP ratio would have gone up by 100 per cent, from 12.1 per cent in 2015 to 24.1 per cent.
Although Nigeria’s debt to GDP ratio is considered among the lowest in Africa, some are worried about the spate of debt accumulation in recent years, while others are not happy with the quality and utilisation of debts by the nation.
The World Bank recently expressed concern over the debt payment to revenue ratio, saying that reduced revenue earnings might render the country’s debt unsustainable. A total of N1.84tn was provided for in the 2017 budget for debt servicing.
Senior Economist at the World Bank office in Nigeria, Yue Man Lee, said for the interest payment to be sustainable, the country either had to increase its revenues or work towards balancing the debt profile.
She said, “Nigeria’s debt to GDP ratio is relatively low. What is of concern is the ratio of interest payment to revenue. That is what is concerning. This reflects the fact that there has been a massive drop in revenues because of drop in oil revenues.
“There are two main strategies to reduce this debt burden. One is to increase the revenues. Here, in order not to be vulnerable to the volatility of the oil sector, the critical thing is to increase the non-oil revenues – the VAT, the income taxes and the excises outside of oil. This is something we have been discussing with the government about.”
Reduced earnings owing to the fall in prices in the international oil market have led to increased borrowing, with a projection of N2.35tn expected to be borrowed in the 2017 fiscal year. The 2016 budget projected a borrowing of N1.84tn for deficit financing.
Nigeria’s debt profile is dominated by local debts, which are characterised by high interest rates. Efforts are being made to secure more foreign loans and reduce the exposure of the Federal Government to the domestic debt market.