Business

Debt Servicing To Hit N10.43tn, Economists Slam FG

Published

3 years ago

August 8, 2022

The Federal Government has projected that debt servicing will cost N10.43tn by 2025, according to the 2023-2035 Medium Term Expenditure Framework & Fiscal Strategy Paper.

This is a 182.66 per cent increase from the N3.69tn budgeted for debt service in 2022.

Multilateral agencies and economists have constantly warned the Federal Government about the rising cost of debt service, which can trigger a crisis for the country.

However, the Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, and the Director General of the Debt Management Office, Patience Oniha, have insisted that the country does not have a debt problem but a revenue challenge.

In a document by the DMO DG recently obtained by our correspondent, the DMO stated that high debt levels would often lead to high debt services and affect investments in infrastructure.

According to the DMO DG, “High debt levels lead to heavy debt service which reduces resources available for investment in infrastructure and key sectors of the economy.”

In the document, she stressed the need for debt sustainability, which she defined as the ability to service all current and future obligations, while maintaining the capacity to finance policy objectives without resort to unduly large adjustments or exceptional financing such as arrears accumulation, debt restructuring, which could otherwise compromise the economy’s stability.

Speaking at the launch of the World Bank’s Nigeria Development Update titled, ‘The urgency for business unusual,’ held recently in Abuja, the finance minister had admitted that Nigeria was struggling to service its debt.

She said, “Already, we are struggling with being able to service debt because even though revenue is increasing, the expenditure has been increasing at a much higher rate, so it is a very difficult situation.”

The International Monetary Fund had earlier warned that debt servicing might gulp 100 per cent of the Federal Government’s revenue by 2026 if the government failed to implement adequate measures to improve revenue generation.

According to the IMF’s Resident Representative for Nigeria, Ari Aisen, based on a macro-fiscal stress test that was conducted on Nigeria, interest payments on debts might wipe up the country’s entire earnings in the next four years.

Aisen said, “The biggest critical aspect for Nigeria is that we have done a macro-fiscal stress test, and what you observe is the interest payments as a share of revenue, and as you see us in terms of the baseline from the federal government of Nigeria, the revenue of almost 100 per cent is projected by 2026 to be taken by debt service.

“So, the fiscal space or the amount of revenues that will be needed and this, without considering any shock, is that most of the revenues of the Federal Government are now, in fact, 89 per cent and it will continue if nothing is done to be taken by debt service.”

Less than two months after Aisen’s warning, the finance minister disclosed that Nigeria’s debt service cost surpassed its revenue in the first four months of this year.

Debt service gulped N1.94tn between January and April 2022, as against a retained revenue of N1.63tn.

According to a recent PUNCH report, the Federal Government exceeded its debt service allocation by N1.15tn for the period between January and November 2021.

A copy of the public presentation of the 2022 approved budget by the finance minister showed that the Federal Government allocated N3.32tn for debt servicing in 2021.

However, the minister’s presentation document showed that a total of N4.2tn was spent on debt servicing in 11 months, indicating a difference of N1.15tn or 37.9 per cent of the money allocated for debt servicing for the period.

The PUNCH also reports that Nigeria’s debt servicing bill increased by 109 per cent, from N429bn in December 2021 to N896bn in March 2022.

A report by the Nigerian Economic Summit Group and the Open Society Initiative for West Africa has disclosed that Nigeria and 10 other Economic Community of West African States countries are currently in debt distress based on debt sustainability analysis.

The 10 other countries are: Benin, Burkina Faso, Cabo Verde, the Gambia, Ghana, Guinea Bissau, Liberia, Niger, Senegal, and Togo.

It was further disclosed in the report that public debt accumulation for these countries was becoming unsustainable and needed to be addressed to avert the looming debt crisis.

The report warned that the possibility of a debt crisis in Nigeria would adversely affect public and private investments, as well as other sectors of the country.

The World Bank recently said that Nigeria’s debt, which might be considered sustainable for now, was vulnerable and costly.

According to the Washington-based global financial institution, the country’s debt was also at risk of becoming unsustainable in the event of macro-fiscal shocks.

Experts have kicked against the Federal Government’s proclivity for debt, which they have described as unsustainable.

Economists slam FG’s debt proclivity

The Chief Executive Officer of Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said that the Nigerian economy had been characterised by diverse economic vulnerabilities, which included rising public debt and debt service burden.

He said, “Debt service to revenue ratio for the first four months of the current year is over 100 per cent. The implication of this is that the actual revenue of the government over the period is not sufficient to service debt. Therefore, financing of the operations of government – personnel cost, overhead cost, capital expenditure, and even part of the servicing of the debt – will have to come from additional borrowing. These portend severe vulnerabilities for the Nigerian economy.”

A Professor of Development Macroeconomics at the University of Lagos, Prof Olufemi Saibu, criticised the government for over-borrowing.

He said, “I think we are over-borrowing. We continue to rely on international benchmarks, which make us lazy in terms of revenue generation.”

Prof Saibu urged the government to lessen its huge expenditure costs and channel money into more productive sectors of the economy.

“With our current heavy infrastructure debt financing and the low productivity in the local economy, the government needs to find a way of reducing its expenditures. We need to redirect the government’s finances to areas that are productive and borrow less for consumption,” he said.

In addition, Prof Saibu said that the government needed to look inwardly and borrow domestically rather than externally, which would lessen the burden of debt service.

He said the government should stop saying the country had the capacity to borrow more, and refrain from ballooning already outsized debts.

Prof Saibu advised that the government should engage the private sector in the area of infrastructure development to reduce the weight on the public sector.

A Professor of Development Economics at Babcock University, Prof Adegbemi Onakoya, said that borrowing was not an issue but the value obtained from it.

He also said that Nigeria had a revenue problem, which had made the country rely more on debt financing.

Prof Onakoya also said that there was a problem when money borrowed was not judiciously applied for productive purposes or programmes that would help production.

PUNCH

Business

Naira Records Highest Depreciation Against US Dollar

Published

15 hours ago

January 10, 2026

Editor

The Naira recorded the highest depreciation against the United States dollar at the official foreign exchange on Friday to end the week on a negative note.

Central Bank of Nigeria data showed that the Naira extended its dip on Friday to N1,423.17 against the dollar, down from N1,419.72 traded on Thursday.

This represents a N3.45 depreciation against the dollar on a day-to-day basis, the highest in the week under review and in 2026 so far.

Meanwhile, at the black market, the naira remained at N1,490 per dollar on Friday, the same rate recorded on Thursday.

In the other week, the Naira recorded three gains and two losses against the US dollar and other currencies.

The development comes amid the continued rise in the country’s external reserves, which hit $45.67 billion as of January 8, 2026.

Business

KPMG Flags Five Major ‘Errors’ In Nigerian Tax Laws

Published

1 day ago

January 9, 2026

Editor

Fresh apprehension has surfaced over Nigeria’s newly implemented tax framework after KPMG Nigeria highlighted what it described as “errors, inconsistencies, gaps, and omissions” in the new tax laws that took effect on January 1, 2026. The professional services firm in a recent statement cautioned that failure to address these issues could weaken the overall objectives of the tax reforms.

Nigeria’s tax overhaul is built around four major legislations: the Nigeinpieces of legislation:ria Tax Act (NTA), the Nigeria Tax Administration Act (NTAA), the Nigeria Revenue Service (NRS) Establishment Act, and the Joint Revenue Board (JRB) Establishment Act. The laws were signed by President Bola Ahmed Tinubu in June 2025 and formally commenced in 2026. However, the reforms have continued to attract controversy since they were first introduced in October 2024.

Despite the concerns, government officials have consistently described the reforms as essential to improving Nigeria’s low tax-to-GDP ratio and modernisingpieces of legislation:modernizing the country’s tax system in line with evolving economic conditions.

In a detailed review, KPMG outlined several areas of concern.

Capital gains, inflation modernizing inflation and market response

KPMG flagged Sections 39 and 40 of the Nigeria Tax Act, which require capital gains to be calculated as the difference between sale proceeds and the tax-written-down value of assets, without adjusting for inflation. According to the firm, this approach is problematic given Nigeria’s prolonged high-inflation environment.

Data from the National Bureau of Statistics shows that headline inflation has remained in double digits for eight consecutive years, averaging over 18 percent between 2022 and 2025. Over the same period, asset prices have been significantly influenced by currency depreciation and general price increases.

Market data also reflects investor sensitivity to tax policy changes. Although the NGX All-Share Index gained more than 50 percent over the year and market capitalisation inflation,capitalization approached N99.4 trillion, equities experienced sharp sell-offs in late 2025. In November alone, market value reportedly declined by about N6.5 trillion amid uncertainty surrounding the new capital gains tax regime.

KPMG warned that taxing nominal gains in such an environment could result in investors paying tax on inflation-driven increases rather than real economic gains. The firm recommended introducing a cost indexation mechanism to adjust asset values for inflation, noting that this would reduce distortions while still enabling the government to earn revenue from genuine capital appreciation.

Indirect transfers and foreign investment concerns

Attention was also drawn to Section 47 of the Nigeria Tax Act, which subjects gains from indirect transfers by non-residents to Nigerian tax where the transactions affect ownership of Nigerian companies or assets.

This provision comes at a time of subdued foreign investment. Figures from the United Nations Conference on Trade and Development indicate that foreign direct investment inflows into Nigeria remain below pre-2019 levels, reflecting ongoing investor caution.

While similar rules exist in other countries, KPMG noted that they are often supported by detailed guidance and clear thresholds. The firm advised Nigerian tax authorities to issue comprehensive administrative guidelines to clarify scope, thresholds,capitalizationthresholds, and reporting obligations inorder to reduce disputes and limit potential negative effects on foreign investment.

Foreign exchange deductions and business impact

Another issue identified relates to Section 24 of the Act, which restricts businesses from deducting foreign-currencyforeign currency expenses beyond their naira equivalent at the official Central Bank of Nigeria exchange rate.

In reality, limited access to official foreign exchange forces many companies to source FX at higher parallel market rates. Under the current rule, the additional cost becomes non-deductible, effectively increasing taxable profits and overall tax liabilities.

KPMG observed that although the provision aims to discourage FX speculation, it does not adequately reflect supply constraints. The firm recommended allowing deductions based on actual costs incurred, provided transactions are properly documented, to avoid penalisingforeign currencypenalizing businesses for factors outside their control.

VAT-related expense disallowances

Section 21(p) of the Nigeria Tax Act also came under scrutiny for disallowing deductions on expenses where VAT was not charged, even if the costs were entirely business-related.

Given Nigeria’s large informal sector and persistent VAT compliance gaps, analysts argue that the rule unfairly shifts part of the VAT enforcement burden onto compliant taxpayers. KPMG advised that the provision be removed or significantly amended, stressing that expense deductibility should be based on whether costs were wholly and necessarily incurred for business, while VAT compliance should be enforced directly on defaulting suppliers.

Non-resident taxation uncertainties

KPMG further highlighted ambiguities around the compliance obligations of non-resident companies. While the Nigeria Tax Act recognizespenalizingrecognizes withholding tax as the finalthe final tax for certain nonresident payments in the absence of a permanent establishment or significant economic presence, the Nigeria Tax Administration Act does not clearly exempt such entities from registration and filing requirements.

Nigeria’s network of double taxation treaties, including agreements with the UK, South Africa, Canada, and France, generally supports the principle that final withholding tax extinguishes further obligations. Experts warn that inconsistencies between the laws could create uncertainty and discourage foreign participation.

KPMG recommended harmonizing the relevant provisions of the NTA and NTAA, with explicit exemptions for non-resident companies whose tax obligations have been fully settled through withholding tax. The firm noted that such alignment would ease compliance and enhance Nigeria’s appeal for cross-border transactions.

As Nigeria undertakes its most extensive tax reform in decades, KPMG concluded that the success of the overhaul will depend on clarity, consistency, and alignment with international best practices. Without timely amendments, businesses may face higher costs, foreign investors could remain cautious, and capital markets may continue to experience volatility.

Recall that KPMG concerns come after a lawmaker, Abdulsamman Dasuki, raised alarm over alleged alterations to the gazetted tax laws.
(DAILY POST)

Business

Naira Records First Depreciation Against US Dollar In 2026

Published

1 day ago

January 9, 2026

Editor

The Naira recorded its first depreciation against the United States dollar in the official foreign exchange market on Thursday, the first time in 2026 so far.

The Central Bank of Nigeria’s data showed that it weakened on Thursday after days of gains to N 1,419.72 per dollar, down from N 1,418.26 on Wednesday.

This means that for the first time this year, the Naira dipped by N1.46 against the dollar on a day-to-day basis.

Similarly, the Naira also depreciated by N10 at the black market to N1,490 on Thursday, down from the N1,480 recorded the previous day.

This comes despite the continued rise in the country’s foreign reserves to $45.64 billion as of Wednesday, 7th January 2026.

DAILY POST reports that the Naira recorded a seven-day bullish run at the official foreign exchange before Thursday’s decline.