Why the debt service-to-income ratio is high – FG


Minister of Finance, Budget and National Planning Ms. Zainab Ahmed blamed Nigeria’s high debt service-to-income ratio on the country’s large spending base.

Ahmed, in an interview with Bloomberg Friday said the federal government was working to increase revenues and reduce spending.

She said: “Our debt service to overall revenue is high because we have a very large expenditure base. We have a large part of our budget dedicated to the payroll, and the President had decided at the start of his administration that we were not going to disengage staff.

“So you have to pay salaries, you have to pay pensions. And also, we have to fund the other branches of government, which are the judiciary and the legislature. “

The minister said revenues were increasing but expenses were increasing at a much faster rate.

“So we have an income problem. And we strive to cut expenses by being able to limit agency spending to 50 percent of their revenues, ”she added.

The minister said the country may enter the foreign capital market again this year, given the success of the latest bond he lifted.

She said about $ 12 billion had been made available, although the country only took $ 4 billion.

Regarding the rise in oil prices, Ahmed said: “The high price of oil means that we would be able to earn more income. At $ 85 a barrel, that’s well above the $ 40 a barrel we have in our financial projections for 2021.

“But we also have the challenge of having to buy petroleum products for use in the country, because we don’t have functioning refineries. So that reduces the income that we would otherwise have made. ”

She said that with the commissioning of the Dangote refinery in 2022, the country would be able to save 30% of its current spending on oil and generate foreign exchange through the sale of petroleum products to neighboring countries.

According to Ahmed, the ministry is working with the Central Bank of Nigeria to narrow the gap between the official and unofficial dollar rate.

“It is our desire to be able to reduce the gap between the unofficial market rate and the official market rate. Again, what we need to do is improve the sources of foreign exchange earnings. At present, the predominant source is oil and gas, ”she added.

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