Nigeria’s Minister of Finance, Wale Edun, announced a significant improvement in the country’s revenue to debt service ratio, which decreased from 97% in 2023 to 68% in 2024. This indicates a notable reduction in the government’s debt burden. Edun made this announcement during a press briefing in Abuja on Thursday.
Key Points:
- Revenue Management: Edun highlighted that Nigeria’s revenue management now emphasizes transparency, accountability, and visibility in government spending. The country no longer relies on ways and means advances from the Central Bank of Nigeria (CBN) to fund its fiscal obligations.
- Debt Service Decline: The total debt service ratio has declined from 97% of revenue in the first half 2023 to 68% in 2024.
- Government Reforms: Edun emphasized reconfiguring processes and procedures to ensure greater transparency and accountability in government spending. He stated that this is crucial for earning the trust of the populace regarding the wise use of their money.
Inflation Target:
- The federal government aims to reduce the inflation rate to between 20% and 25% by the end of the year, and the CBN has also signalled this target.
- The government is creating incentives in the agricultural sector and the oil and gas industry to drive economic growth and productivity.
Debt and Economic Outlook:
- Edun projected that Nigeria’s total debt stock would decline to about $95 billion in dollar terms.
- He also expects budget deficits to be around 4%, the government’s target.
Context and Impact:
- Under the previous administration, Nigeria borrowed a substantial sum of N27 trillion from the CBN through ways and means of advances, leading to cost-push inflation and an excess money supply in the economy.
- According to the new CBN chief, Yemi Cardoso, this excess money supply drives the current inflationary pressure. According to the National Bureau of Statistics (NBS), Nigeria’s inflation rate peaked at a 28-year high of 34.19% in June.
- In response, the Cardoso-led Monetary Policy Committee has continued to raise the interest rate, currently at 26.75%, to control inflation.
The improvements in Nigeria’s revenue-to-debt service ratio and the government’s measures to control inflation and promote economic growth reflect a significant shift in fiscal management and policy direction to stabilise the economy.
