Nigeria spends 96% of its revenue on debt servicing in 2021, worst on record

Nigeria’s Federal government incurred a sum of N4.22 trillion on debt servicing in 2021, increasing by 29.3% compared to N3.27 trillion spent in the previous year. On the other hand, revenue for the period only increased marginally by 9.3% to N4.39 trillion.

This means that Nigeria spent about 96% of its revenue on servicing debt obligations in the year under review. Compared to the previous year, Nigeria’s debt service-to-revenue ratio increased from 81.1% in 2020 to 96% in the year under review.

This is according to analysis carried out by Nairalytics, the research arm of Nairametrics on data from the Central Bank of Nigeria (CBN).

Nigeria’s government revenue has been constrained in recent times by the underperformance of oil revenue due to the continuous decline in production capacity and volatility in the price of crude oil. According to data from the National Bureau of Statistics (NBS), Nigeria’s daily crude oil production dropped to 1.6mbpd in 2021 from 1.78mpbd recorded in the previous year.

Notably according to recent data from the Organization of Petroleum Exporting Countries (OPEC), Nigeria’s crude oil production further declined to 1.238mbpd in March 2022 from 1.258mbpd average production recorded in February 2022.

Interestingly, despite the increase in the Value Added Tax rate from 5% to 7.5%, Nigeria’s non-oil revenue has not been able to fill the gap caused by the underperformance of oil earnings, hence an underwhelming gross revenue.

Meanwhile, debt service obligation continues to trend upward given continuous borrowings by the federal government to fund its budget deficit.

According to information from the Debt Management Office (DMO), Nigeria’s total debt profile rose to its highest level in 2021, hitting a record high of N39.56 trillion ($95.78 billion) as of December 2021, representing an N6.64 trillion ($9.39 billion) increase compared to N32.92 trillion ($86.39 billion) recorded as of the same period of the previous year.