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Rising Cost of Debt Servicing weighing on FG’s Revenue – PwC

The increasing cost of servicing debt continues to weigh on the Federal Government’s revenue profile, a PwC report has said.

This report was titled ‘Nigeria Economic Alert: Assessing the 2021 FGN Budget.’

According to the report, the Federal Government keeps spending a huge amount of its revenue to service debt, and the debt-to-revenue ratio in 2020 is about 83 per cent.

It said, “Actual debt servicing cost in 2020 stood at N3.27tn and represented about 10 per cent over the budgeted amount of N2.95tn. This puts the debt-to-revenue ratio at approximately 83 per cent, nearly double the 46 per cent that was budgeted.

“This implies that about N83 out of every N100 the Federal Government earned was used to settle interest payments for outstanding domestic and foreign debts within the reference period. In 2021, the FG plans to spend N3.32tn to service its outstanding debt. This is slightly higher than the N2.95tn budgeted in 2020.”

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In a recent telephone interview with The PUNCH, a financial expert, Ovie Ogidiaka, spoke on the risk of increasing debt in Nigeria, saying the money that should be used for capital infrastructure was deployed to service debt.

“Accumulated debt can hinder a country’s development, especially when most of the revenue generated is used to service debt. When money that should be used to pay salary or cover cost of capital infrastructure is used to pay debt, people are affected as they don’t have enough money to spend. So, when huge amount is used to service debt, there is no way capital development can happen, and this affects the people and the country generally,” Ogidiaka had said.

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