It is not the best of times for Nigeria’s finances. A slump in oil revenues – which accounts for 80 percent of the country’s total revenue – recorded in the past few months complimented by a rising debt portfolio is stimulating worries for Africa’s largest economy. Authorities however remain calm.
Nigeria’s oil revenue for July fell 24.5 percent to N630.3 billion ($3.89 billion) from N784.9 billion ($4.84 billion) in June as a result of a decline in Companies Income Tax collection and production hiccups including a force majeure declared by Shell. Other factors include the shutdown of trunk lines and pipelines at Akpo and Bonny terminals.
The revenue declines meant Nigeria’s Federation Accounts Allocation Committee (FAAC) had to augment the allocation for the branches of government with $6.2 billion from the country’s Excess Crude Account.
About N654.585 billion ($4.04 billion) was distributed across the tiers of government with the Federal Government collecting N247.323 billion ($1.53 billion), the state governments sharing N130 billion ($800 million), while Local Governments collected N100.624 billion ($620 million). 13 percent mineral derivation amounting to N52.878 billion ($330 million) went to the oil producing states in the Nigeria’s Niger-Delta region.
Rising debt profile
$6.5 billion in 2012, $8.821 in 2013, Nigeria’s total stock of external debt has risen by 6.3 percent to $9.38 billion in the first half of 2014. The West African Country’s external and domestic debts amounted to a combined N8.8 trillion or $57.030 billion as at the end of June 2014 while borrowing from multilateral Institutions stood at $3.826 billion. Loans from bilateral sources mainly China Exim Bank and Eurobond amounted to $2.537 billion.
Although acknowledging the concern for Nigeria’s debt profile, the country’s Director General, Debt Management Office, Dr. Abraham Nwankwo assured that the debt remained sustainable at a ratio of 12.51 to the Gross Domestic Product, GDP. “Our current debt/GDP ratio is about 12.51 per cent which is much lower than the 56 per cent total public to GDP for countries of Nigeria’s group”, he averred.
However, Nwankwo stated that the managers of the nation’s debt would apply more caution in further borrowings in order not to run into the crisis of debt overhang, which the nation once suffered. “In spite of the re-basing which means we have more capacity to borrow, we are not going to borrow without caution. In fact, we are going to be more cautious, especially because our tax-GDP ratio is low. Many economic agents do not pay their taxes”, he said.
