80% of Nigeria’s revenue goes into debt servicing – IDB

The Resident Representatives of IDB in Nigeria, Abdallah Mohammed Kiliaki, who made this known during courtesy visit to the Chairman of the Senate Committee on Local and Foreign Debts, Senator Shehu sani, lamented that the amount is very high when compared to other countries.

Kiliaki explained that ‎Nigeria’s Debts GDP ratio is low at 17 per cent, but resources being used to pay the debts are enormous going by percentages taken on yearly basis.

He said: “‎My visit is very crucial because we need to look at the debt profile of a country before we give new a contractual sort of financing.

“We also work closely with the International Monetary Fund and the World Bank to ensure that our financing has the required threshold of grant financing, which is normally 35 per cent, but at the same time there were financing that is not a burden to a country to the extent that the debt may not be sustainable.

“When talking about unsustainable debt, it means that a country or a borrower is unable to pay.

“So we take very serious note of that.

“When you look at the debt GDP ratio of Nigeria, it is very low.

“It is very low.

“It is 17 per cent compared to Italy and other countries, which is about 150 per cent, while that of the United States is about 100 per cent.

“But there is a caveat: it is true that debt to GDP ratio is low but when you look at the amount, the revenue to debt servicing ratio, the amount of money that the government is collecting, the revenue of the government vis-a-vis the ratio to the total debt, I think Nigeria pays about 75 to 80 per cent of its revenue to service debt.

“So, this is very, very high compared to other countries where they use just 10 per cent.

“Debt to GDP ratio is low.

“Meaning that that there is capacity to borrow.

“At the same time, the domestic resources to service those debts, the ratio is quite high.

“What that means is that one, the government of Nigeria needs to expand or mobilise additional resources through taxation by broadening the tax base but at the same time we as lenders, financiers, we need to reconsider our conditions of financing.

“Meaning that we should try as much as we can to extend to Nigeria financing that will not make it difficult for the country to pay its debt.

“There is a role that the government can play and there is a role that we as financier can play.”

In his remarks, Senator Sani declared that Nigeria’s total debts presently stand at $60 billion.

He implored bank and other multilateral financial institutions to stop propping the country into taking more loans on account of its low ratio of debts servicing to GDP.

He said that what is 17 per cent today may, if needed control measures are not applied, go up to 77 per cent and invariably returning the country back to where it was before 2006 when the London and Paris Clubs wrote off a substantial part of her foreign debts then.