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DMO replies LCCI, says problem with debt to revenue ratio is low revenue

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The Debt Management Office (DMO) is low revenue and the country dependent on sale of crude oil as major source of income.

“The attention of the Debt Management Office (DMO) is drawn to a recent report by the Lagos Chamber of Commerce and Industry (LCCI), which stated that “staying within the current Debt-to-GDP threshold is an unreliable means of calibrating Nigeria’s current debt burden”. According to the Chamber, “the government must review its borrowing parameters on the basis of the country’s Debt-to-Revenue Ratio, which currently calls for concerns”, said the debt office.

DMO however explained that, the Federal Government of Nigeria (FGN) is aware of the country’s relatively high Debt Service-to-Revenue Ratio and has published the figures over the years, as well as included them in public presentations.

The primary reason for the high Debt Service-to-Revenue Ratio is because Nigeria’s revenue base is low. Furthermore, the Government is largely dependent on the sale of crude oil, as a major revenue source. If Nigeria, with a Revenue-to-GDP Ratio of nine per cent, generated revenues close to countries such as Kenya, Ghana and Angola with Revenue-to-GDP Ratios of 16.6 per cent, 12.5 per cent and 20.9 per cent respectively, then, its Debt Service-to-Revenue would be lower.