March 23, 2021

Nigeria debt-to-revenue ratio to rise 395% in 2022 — Fitch

Our land soaked in blood, gloom, South-East Bishops wail

A map of Nigeria

By Nkiruka Nnorom


Fitch Ratings, world’s major credit rating agency, has projected that Nigeria’s debt- to-revenue ratio will rise to 395 percent by 2022, indicating that growth rate in public debt would far outstrip its revenue.

The rating agency also stated that debt interest cost would consume 24 percent of the country’s revenue in 2022.

Already, Nigeria’s debt-to-revenue ratio stood at 83 percent as at December 2020. It had risen to 89 percent between January and November 2020 before slowing down to the current figure. 

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In a note announcing Nigeria’s ‘B’ rating, Fitch said: “General government (GG) debt will further rise to 32.6 percent of GDP in 2022, from less than 13 percent a decade earlier, but will remain much below the forecast ‘B’ median of 70 percent. 

The key challenge to debt sustainability stems from low fiscal revenue.

“The GG debt-to-revenue ratio will rise to 395 percent in 2022 on our forecasts, versus a forecast ‘B’ median of 325 percent. Debt interest cost will consume 24 percent of revenue in 2022, against a ‘B’ median of 11 percent.

“The picture is much weaker at the federal government (FGN) level, with forecast debt-to-revenue and interest-to-revenue ratios of 1,031 percent and 64 percent, respectively, in 2022, reflecting a higher share of the FGN in GG spending and debt than in GG revenue.”

It also projected a narrowing in the GG deficit to 4 percent of the GDP in both 2021 and 2022, from 6.3 percent in 2020, saying that it is better than the forecast ‘B’ median of seven percent and 4.8 percent, respectively.

Fitch stated: “The improvement in the fiscal deficit will be driven by the rebound in oil prices to well above the level assumed in the 2021 budget and the revival in economic growth. A $10 change in the oil price per barrel relative to our baseline would affect the GG balance by around 0.5 percent of GDP, while a 10 percent change in annual average oil production would impact the GG deficit by 0.3 percent of GDP.”

According to Fitch Ratings, Nigeria has not solicited any relief under the G20’s debt service suspension initiative adding that the benefit of joining the initiative would be small.

“We do not expect the government to request any debt relief under the G20’s Common Framework as the authorities attach high importance to access to international markets,” Fitch explained.