The International Monetary Fund has stated that, while Nigeria and other low-income debtors are yet to request debt relief, high debt servicing costs continue to be a significant concern.
The PUNCH reported that the multilateral lender stated that the good news was that no low-income country had made a major request for comprehensive debt relief since Ghana’s, more than a year ago.
Regarding policy improvements targeted at raising revenue, the IMF praised Nigeria and three other countries for recent subsidy reforms that will free up funds for development investment.
It stated, “To build resilience in the face of these trends, countries must act. Some countries have achieved progress—for instance, Angola and The Gambia, Nigeria and Zambia have taken steps to implement significant energy subsidy reforms to create space for development spending.”
The IMF, however, expressed concern that many countries were falling behind, particularly in initiatives to increase revenue, such as broadening the tax base, lowering tax exemptions, and improving tax administration.
For example, typical Sub-Saharan African countries generated only 13% of GDP in revenue in 2022, compared to 18% in other emerging and developing countries and 27% in mature economies.
According to the Debt Management Office, Nigeria’s national debt climbed to N87.91 trillion by the end of the third quarter of 2023.
In 2024, the federal government intends to spend N8.25 trillion on debt payments. The figure equals 45% of anticipated income and has sparked disapproval from economists, notably the World Bank, which has warned that unless urgent reforms are adopted, Nigeria’s debt service-to-revenue ratio will exceed 160 per cent by 2027.
The report stated, “One crucial statistic is the share of income collected from its population through taxes and other levies that go to pay its foreign creditors. While the amount of the load varies widely by country, it is generally approximately two and a half times more than a decade ago.
“This means that for a typical low-income borrower, the percentage has climbed to over 14%, up from around 6%, and as high as 25%, up from approximately 9% in other nations. This is one of the primary indicators used in the methodology for analyzing debt sustainability that signifies a country’s risk of needing financial support from the IMF or of skipping a debt payment.”
