The Budget Office of the Federation has said Nigeria now has a “limited borrowing space” due to its poor debt-to-revenue ratio, stressing that “trouble” looms for the country if it exceeds its limits.

The office issued the warning as outgoing President Muhammadu Buhari, wrote to the National Assembly seeking approval for a fresh $800m loan from the World Bank.

Director-General of the Budget Office, Ben Akabueze, while addressing members-elect of the 10th National Assembly at their week-long induction ceremony in Abuja on Wednesday, pointed out that while Nigeria remains healthy with its debt-to-GDP ratio, the country is not with its debt-to-revenue ratio.

Akabueze was speaking to the newly elected and returning members of the National Assembly, which is responsible for the consideration, amendment and passage of annual budgets of the Federal Government as well as economy bills like the Finance Bill.

He said, “You may have heard that we have one of the lowest Gross Domestic Products-to-debt ratios in the world. While the size of the FG budget for 2023 created some excitement, the aggregate budget of all the governments in the country amounted to about N30tn. That is less than 15 per cent in terms of ratio to GDP.

“Even on the African continent, the ratio of spending is about 20 per cent. South Africa is about 30 per cent; Morocco is about 40 per cent. And at 15 per cent, that is too small for our needs. That is why there is fierce competition for the limited resources.

“That can determine how much we can relatively borrow. We now have very limited borrowing space; not because our debt to GDP is high, but because our revenue is too small to sustain the size of our debt. That explains our high debt service ratio. Once a country’s debt service ratio exceeds 30 per cent, that country is in trouble and we are pushing towards 100 per cent, and that tells you how much trouble we are in,” he added.

The data obtained from the Washington-based bank showed that Nigeria had a debt of $488.66m from IBRD and $13.85bn from IDA as of March 31, 2023.

It was observed that the first World Bank loan was acquired in the fiscal year of 1947, according to data from the World Bank.

Since that period, Nigeria has acquired a total of $7.49bn from IBRD and $26.17bn from IDA.

This means that a total of $33.66bn has been borrowed from the World Bank since 1947.

It was also observed that about $7.29bn had been repaid on the loans, with $7.86bn yet to be disbursed by the bank. (The PUNCH)

Update news