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FG hints on why debt service to revenue ratio is high

“So, you have to pay salaries, you have to pay pensions. And also, we have to fund the other arms of government, which are the judiciary and the legislature.”

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Minister of Finance, Zainab Ahmed

Zainab Ahmed, Minister of Finance, Budget and National Planning, has attributed  Nigeria’s high debt service to revenue ratio on the country’s large expenditure.

Ahmed made the claim over the weekend in an interview with Bloomberg, saying the federal government was working to increase revenues and reduce expenditure.

She said: “Our debt service to overall revenue is high because we have a very large expenditure base. We have a large proportion of our budget dedicated to payroll, and Mr President had decided from the beginning of his administration that we were not going to disengage staff.

“So, you have to pay salaries, you have to pay pensions. And also, we have to fund the other arms of government, which are the judiciary and the legislature.”

According to the minister, revenues were growing but expenditure grew at a much faster rate.

She added: “So, we do have a revenue problem. And we are working to curtail expenditure by being able to limit agencies’ expenditure to 50 per cent of their revenues.”

The minister explained further that the country could approach the foreign capital market again this year, considering the success of the last bond it raised.

Zainab noted that about $12bn was made available, although the country only took

Speaking on the foreign currency, she said her ministry is working with the Central Bank of Nigeria to reduce the gap between the official and unofficial rate of the dollar.

Techeconomy.ng previously reported that the minister said that the government had planned to borrow about N4.89tn from internal and external sources to finance the deficit in its proposed 2022 budget of N13.98trn due to dwindling revenue.

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Ahmed explained that perception of the naira as being overvalued over despite recent adjustment by the Central Bank of Nigeria has compounded Nigeria’s risk aversion in the global capital market, which she said would further put pressure on the foreign exchange market, stressing that foreign portfolio investors have yet to return to the Nigerian market.

 

 

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