Nigeria’s Debt to Revenue Ratio Drops to 65%, How Does it Compare to Other African Countries?

President Bola Ahmed Tinubu on Tuesday announced that Nigeria’s debt-to-revenue ratio has dropped to 65%, a significant drop from approximately 97 percent as at when he assumed office 17 months ago.

He stated this while swearing- in seven new ministers at the Council Chamber of the State House, Abuja.

He said, “For us, it was a challenge when the nation was servicing its debt with 97 percent of its revenue. It was nothing but the edge of the cliff.

“But today, I can report to you that we have brought that down to 65 percent, and we have never defaulted in meeting all obligations, both foreign and domestic.

“We have our head above water. All other countries around us and across the world are also facing challenges.” But how does this figure compare to other African countries?

Debt-to-Revenue Ratio: What is it?

A country’s debt-to-revenue ratio is the percentage of a country’s revenue that is used to service its debt.  A higher debt to revenue generally means a country might struggle to meet its debt servicing needs while a lower debt to revenue means a country generally generates enough revenue to meet up with its debt servicing needs.

Nigeria’s Debt to Revenue Ratio in Recent Years

In the first quarter of 2022, 2021, 2020, and 2019, the country’s debt service-to-revenue ratios to revenues were 120.5 percent, 123.2 percent, 96.7 percent, and 65.8 percent respectively.

During the first nine months of 2023, Nigeria’s debt-to-revenue ratio was 66.9 percent (N5.79 trillion) of the total revenue of N8.65 trillion in the first nine months, lower than 99.3 percent (N4.23 trillion) in the same period of 2022.

So far in 2024, Nigeria‘s debt-to-revenue ratio has dropped to 65 percent with the president stating “Economic recovery was on the horizon.”

How Nigeria’s Debt-to-Revenue Ratio Compares to Other African Countries

Fifteen African countries currently rank in the top 20 globally for the highest ratio of external debt service to public revenue. These include Angola (62.7%), Zambia (42.2%), Egypt (39.9%), Djibouti (38.9%), Tunisia (30.9%), and Benin (27.7%). As of December 2023, Ghana’s debt-to-revenue ratio stood at 72.3%.

Nigeria is therefore on the path to further bringing down its Debt-to-revenue ratio.

Significance

The drop in Nigeria’s debt-to-revenue ratio is a significant milestone in Nigeria’s economic reforms. Achieving a healthy debt-to-revenue ratio would mean that the country generates enough revenue to service its debts without harming the economy.

Unlike in times past when Nigeria spent almost all its revenue on servicing debt leaving little or nothing for infrastructural and human capital development across the country, the current drive to reduce the country’s debt-to-revenue ratio is a significant part of revitalizing the country’s economy.

 

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