• Login
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
  • Home
  • News
    • General
    • Political
  • Economy
  • Business
    • Agribusiness
    • Aviation
    • Banking & Finance
    • Energy
    • Insurance
    • Manufacturing
    • Markets
    • Maritime
    • Real Estate
    • Tourism
    • Transport
  • Technology
    • Telecom
    • Cyber-security
    • Cryptocurrency
    • Tech-guide
    • Social Media
  • Features
    • Interviews
    • Opinions
  • Reports
    • Banking/Finance
    • Insurance
    • Budgets
    • GDP
    • Inflation
    • Central Bank
    • Sec/Gse
  • Lifestyle
    • Sports
    • Entertainment
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video
No Result
View All Result
No Result
View All Result
NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
No Result
View All Result
Home Economy

Nigeria in a limbo; borrowing to service debt

4 years ago
in Economy, highlights, Home, home-news, latest News
3 min read
0 0
0
161
VIEWS
Share on FacebookShare on TwitterShare on Linkedin

Borrowing to fund infrastructural projects by developed and developing economies is a norm as it helps enhance economic development. However, when borrowing is used to fund or service previously acquired loans, it becomes a problem as is the case with Nigeria.

According to information presented by the Minister of Finance, Dr Zainab Ahmed, Nigeria has spent a sum of N1.8 trillion on debt servicing between January and May 2021, despite only spending N973.13 billion on capital expenditure, and earning just N1.84 trillion revenue.

A cursory look at the data from the Debt Management Office (DMO) shows that Nigeria’s total loan profile increased to $87.24 billion as of March 2021 from $86.39 billion as of December 2020. This indicates an aggregated additional loan of $847 million within 3 months.

Despite these debt obligations, Nigeria continues to seek further domestic and external loans to run its affairs. The Senate recently approved the $6.1 billion loan requested by President Buhari, part of which would be used to partly finance the 2021 budget deficit.

Now, let’s take a look at the 2021 budget.

Buhari signed a budget of N13.59 trillion for the 2021 fiscal year, from which N3.32 trillion was earmarked for debt servicing. This fiscal budget, however, comes with a deficit of N5.6 trillion, to be sourced from both domestic and foreign sources.

Nigeria’s revenue is currently underperforming its projections, with only 67% performance rate in the first 5 months of the year, while its debt servicing of N1.8 trillion had already surpassed its prorated N1.39 trillion earmarked for the period, which took Nigeria’s debt service-to-revenue ratio to a massive 98%.

RelatedPosts

Regular Fiscal Data Publication Key to Having an Effective Fiscal Council, Says Oppong Nkrumah

Finance Ministry Backs New Fiscal Council to Anchor Discipline and Stability

2025 Study: Where High Earners Keep Most of Their Money 

What happened in 2020

The Nigerian government for the 2020 fiscal year budgeted a sum of N2.95 trillion for debt servicing but ended up spending N3.27 trillion to service previously acquired debts, while it received new loans of about N3.28 trillion. Doing the maths, we realised we are left with only N16.1 billion to fund infrastructural projects, if not spent on recurrent expenses.

  • The same is likely to happen in the current year, as Nigeria continues to pursue more loans, while its revenue is dwindling significantly. Notably, Nigeria plans to acquire new loans up to N19.69 trillion between 2021 and 2024 and budgets N17.83 trillion to service debts within the same period.
  • This goes without saying that Nigeria would have only about N1.85 trillion to fund developmental projects. A clear indication of how Nigeria is acquiring more loans, which more or less are used to service previous loans.
Expert views

Ebintoye Atte, a research analyst at United Capital plc hits on the effect of more loans on the Nigerian economy and the burden of spending more on debt servicing, despite low revenues. He opined that the high debt service fee will affect other capital projects that would have been done, assuming we do not have to pay so much on servicing loans.

He stated that “Nigeria will have to look towards other sources of revenue, as most of the current revenue is being used for debt servicing, which has affected most of our infrastructural needs.” He also, stated that Nigeria’s debt stock is being affected in the long term, with the new set of loans acquired.

A look at the historical data, Nigeria’s total public debt has grown by $19.51 billion (over N8 trillion) in the past five years and is poised to rise to over N40 trillion by 2024.

According to another research analyst, acquiring new loans has a positive and a negative side and he believes the Nigerian government has voted to acquire more loans, with the expectation that the necessity for the loans overwhelms the burden it brings.

  • On the positive side, he noted that Nigeria needs these loans to fund projects. Notably, he highlighted that one of the major problems facing Nigeria, is the currency market crisis, a problem emanating from insufficient dollar supply. This would have been easily solved assuming we could attract significant foreign capital inflows, which is not coming in at the moment.
  • The next option would be to export more, so as to earn more foreign export proceeds, which is not coming forth due to oil being our major source of export earnings. This has also been affected by the cut in crude production quota by OPEC.
  • This leaves Nigeria with the last and hard option of acquiring more loans. The loans can be used to boost its external reserves and supply the market so as to stabilize it. Also, these loans can be used to finance capital expenditure.
  • On the negative side, the cost of servicing this debt is a problem, as the funds would have been used for capital expenditures. There is also the burden of repaying these loans for the nation to grapple with.
Bottom line

As noted by an analyst, it would appear that “the cost of these borrowings is much greater than the benefits of acquiring the loans,” because Nigerians are hardly feeling the impact of these borrowed funds much less seeing the rationale for acquiring more.

Source: nairametrics
Via: norvanreports
Tags: borrowing to service debtDr Zainab AhmedMinister of FinanceN1.8 trillion on debt servicingNigeriaNigeria’s total loan profile
No Result
View All Result

Highlights

GoldBod Introduces Special Bonus for Licensed Miners

Thomas Partey in Top Form for Black Stars Amid Legal Challenges – GFA 

BoG Tightens Foreign Currency Import and Export Rules to Curb Money Laundering

BoG Reiterates Warning Against Unauthorised Foreign Exchange Transactions

GRA to Tax Cryptocurrency Gains as Authority Prepares Digital Tracking System

 Importers and Exporters Association Decries “Mafiarian” Auctions of Perishable Goods at Ghana’s Ports

Trending

Business

Regular Fiscal Data Publication Key to Having an Effective Fiscal Council, Says Oppong Nkrumah

August 27, 2025

Regular Fiscal Data Publication Key to Having an Effective Fiscal Council, Says Oppong Nkrumah Ranking Member of...

Finance Ministry Backs New Fiscal Council to Anchor Discipline and Stability

August 27, 2025

2025 Study: Where High Earners Keep Most of Their Money 

August 27, 2025

GoldBod Introduces Special Bonus for Licensed Miners

August 27, 2025

Thomas Partey in Top Form for Black Stars Amid Legal Challenges – GFA 

August 27, 2025

Who we are?

NORVANREPORTS.COM |  Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World

NorvanReports is a unique data, business, and financial portal aimed at providing accurate, impartial reporting of business news on Ghana, Africa, and around the world from a truly independent reporting and analysis point of view.

© 2020 Norvanreports – credible news platform.
L: Hse #4 3rd Okle Link, Baatsonaa – Accra-Ghana T:+233-(0)26 451 1013 E: news@norvanreports.com info@norvanreports.com
All rights reserved we display professionalism at all stages of publications

No Result
View All Result
  • Home
  • Business
    • Agribusiness
    • Aviation
    • Energy
    • Insurance
    • Manufacturing
    • Real Estate
    • Maritime
    • Tourism
    • Transport
    • Banking & Finance
    • Trade
    • Markets
  • Economy
  • Reports
  • Technology
    • Cryptocurrency
    • Cyber-security
    • Social Media
    • Tech-guide
    • Telecom
  • Features
    • Interviews
    • Opinions
  • Lifestyle
    • Entertainment
    • Sports
    • Travel
    • Environment
    • Weather
  • NRTV
    • Audio
    • Video

Welcome Back!

Login to your account below

Forgotten Password?

Create New Account!

Fill the forms bellow to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In
NORVANREPORTS.COM | Business News, Insurance, Taxation, Oil & Gas, Maritime News, Ghana, Africa, World
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it.