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Economist explains Nigeria’s ‘poor ability’ to repay debt despite having capacity to do so



The chief economist of KPMG Nigeria, Oyeyemi Kale, said Nigeria’s ability to repay its N46.25 trillion loan is poor due to low revenue generation.

Kale, in a post on Twitter on Saturday, said the country’s debt to Gross Domestic Product (GDP) ratio shows Nigeria has the capacity to repay, but its debt to revenue is a problem.

Ripples Nigeria previously reported that Nigeria’s total public debt stock was now N46.25 trillion as of the end of December 2022.

Figures from the Debt Management Office (DMO) showed a 14.46 per cent increase when compared to the N39.56 trillion (USD95.77 billion) recorded on December 31, 2021.

Addressing the debt issue in Nigeria, Kale, who is the former statistician-general of the federation, said: “Debt has 2 issues. What it is being used for & ability to repay. Debt/GDP represents capacity to repay & is 6-8-%, so there is revenue in the system to repay. But Debt/Rev which is ability to repay is poor at about 80% so not enough revenue is being retrieved from the system,” he wrote in series of tweets.

READ ALSO: Nigeria’s GDP rose by 3.52% in Q4 2022- NBS

He further stated that: “If ability is enhanced through revenue reforms so that ability is raised towards capacity then the conversation about our size of debt disappears. Nigerian debt is only perceived to be too much because ability to pay is poor despite an arguably comfortable capacity to do so.

“In a Nation that needs huge capital expenditure to develop, do we: 1. Curtail debt in the presence of poor revenues which slows development; 2. Borrow & focus energy on revenue reforms to repay debt; 3. Stop borrowing & generate the revenue first which also slows development.

“By the way, there are many other models to fund needed investments but my post is focusing on the particular issue of debt and its issues related to revenue and needed expenditure.”

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