Nigeria’s debt service ratio drops from 97% to 68% – Finance minister

Nigeria’s debt service ratio drops from 97% to 68% – Finance minister

Nigeria’s Finance and Coordinating Minister of the Economy, Wale Edun, on Thursday, reported a dramatic drop in the debt service ratio from an alarming 97 per cent in June 2023 to a more sustainable 68 per cent in 2024.

Addressing a press conference on the economy’s half year performance in Abuja, Edun asserted that the reduction allows the government to redirect funds to essential sectors such as infrastructure, education, healthcare, and social services, thereby improving credibility with investors and international financial institutions.

The Minister also noted a decline in Nigeria’s total debt, both domestic and foreign dollar-denominated debt fell from $181 million to $98 million, attributed to timely payments to contractors and the government’s exit from the Ways and Means financing scheme.

He added that the Federal Government’s economic policies over the past year have started yielding positive outcomes.

Edun highlighted an extraordinary 30 per cent growth in non-oil income, surpassing last year’s performance and exceeding budget expectations for the first half of 2024. He emphasized the government’s commitment to diversifying revenue sources beyond oil through robust tax reforms aimed at doubling government revenue as a percentage of GDP, from approximately 14-15 per cent to around 25 per cent.

He outlined strong measures to improve revenue collection, including technological advancements and process optimization within revenue-generating agencies. While oil revenue remains significant, its share of gross revenue has decreased to 30 per cent, down from 41 per cent during the same period last year.

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To attract investments from Nigerians abroad, the Minister revealed that plans were afoot to issue a $500 million bond within the next four weeks.

The initiative aims to encourage diaspora Nigerians to bring their funds back home for investment, contributing to economic growth.

Edun acknowledged the hardships faced by Nigerians due to reform policies but assured that the benefits of these reforms will soon be realized. He stressed that President Tinubu prioritizes reducing food prices across the country and is deeply concerned about the welfare of ordinary Nigerians. After resolving transparency issues, the Cash Transfer Programme within the Social Investment initiative has resumed, recently covering approximately 600,000 beneficiaries.

He presented evidence of the economy turning a positive corner and noted that macroeconomic stability was becoming evident, with stable exchange rates, a reducing budget deficit, and a positive trade balance.

He added that investment flows are also positive, and there has been a comprehensive reconfiguration of federal finances to boost revenue and control expenditure.

Despite global economic challenges, Nigeria’s economy grew faster in the first quarter of 2024 compared to 2023. The growth was broad-based, spanning agriculture, industries, and services. Agricultural growth, which was negative in the first quarter of 2023, showed modest growth in the first quarter of 2024. The industrial sector grew seven times faster than in Q1 2023.

Edun noted that while inflation persists, the annual growth rate of inflation is slowing. Although there was a slight uptick in June due to seasonal factors, the overall trend indicates progress towards reduced inflation.

Edun concluded by expressing satisfaction with the well-coordinated fiscal and monetary policies, which are beginning to bear fruit. He emphasized that these policies are paving the way for sustained economic growth and stability, ultimately benefiting all Nigerians.

Nigeria’s debt service ratio drops from 97% to 68% – Finance minister