IMF projects Nigeria to spend 92% of revenue on interest payments in 2022

IMF projects Nigeria to spend 92% of revenue on interest payments in 2022

President Muhammadu Buhari The Federal Government’s gross debt interest payments (percent of FGN revenue) is projected to grow by 92% in 2022 from 85.5% in 2021.

This is according to a report titled “Nigeria Staff Report for the 2021 Article IV Consultation ”, published by the International Monetary Fund.

As at the end of September 2021, debt-servicing-to-revenue ratio stood at 76%, implying that 76 kobo out of every N1 earned by the government was spent on payment of interest on debts. IMF’s latest statement estimates the debt-servicing-to-consolidated revenue (total revenues of the government and its agencies) for 2021 and 2022 at 29% and 32.8% respectively. What the IMF is saying about Nigeria

IMF in the latest report said the projections were sourced from Nigerian authorities and its staff estimates and projections.

In a table titled, ‘Nigeria: Federal Government Operations, 2017–26,’ the IMF said Federal Government’s debt is expected to grow to N70.85 trillion in 2022, N83.17trillion in 2023, N97.80trillion in 2024, N115.38trillion in 2025, and N136.11trillion in 2026

The Fund expects the country’s revenues and grants in the year to cap at 7% of total output. Last year’s rate was estimated at 7.4%, which is much higher than 6.3% achieved in 2020.

It said Nigeria’s economy is recovering from a historic downturn benefitting from government policy support, rising oil prices and international financial assistance.

The IMF said, “ Nigeria’s level of public debt increased sharply last year due to the COVID-19 crisis. Public debt had been on an increasing path in the last decade reaching 29 per cent of GDP in 2019 from 9% in 2009, driven by primary deficits as weak non-oil revenue mobilization failed to compensate for falling oil revenues.

“ In 2020, the sharp decline in oil revenues increased public debt further to 35 per cent of GDP. The debt-to-GDP ratio is expected to increase in the medium term to 43 per cent of GDP, despite favourable growth-interest rate dynamics. Gross financing needs are expected to increase to 8.9 per cent of GDP in 2021 from 7.3% in 2020, and to 11.4% in the medium term.”

It went on to say that, despite interest payments accounting for only 2% of GDP in 2020, interest payments accounted for 89 percent of the Federal Government’s income, indicating a lack of domestic revenue mobilization potential.

The government’s interest-to-revenue ratio is likely to drop somewhat to roughly 86 percent in 2021 before rising to 139 percent […]

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