Business

Nigeria’s Debt Vulnerable, Costly, Alerts World Bank

Published

4 years ago

January 4, 2022

The World Bank has disclosed that Nigeria’s debt, which may be considered sustainable for now, is vulnerable and costly.

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

The bank said this in the November edition of its Nigeria Development Update.

It said, “Nigeria’s debt remains sustainable, albeit vulnerable and costly, especially due to large and growing financing from the Central Bank of Nigeria.

“While currently the debt stock of 27 per cent of the Gross Domestic Product is considered sustainable, any macro-fiscal shock can push debt to unsustainable levels.

“However, the debt to the GDP in Nigeria is rising quickly, and the total stock of debt in absolute value has almost doubled between 2016 and 2020, and without a policy change is expected to reach 40 per cent of the GDP by 2025.”

The bank further expressed concerns over the nation’s cost of debt servicing, which according to it, disrupts public investments and critical service delivery spending.

“The cost of debt servicing is also a concern as it is potentially crowding out public investment and critical service delivery spending. Interest costs have been above two per cent of the GDP since 2018, reaching 2.4 per cent of the GDP in 2019 and then falling to 2.2 per cent of the GDP in 2020.

“Cost of debt is high as Federal Government also resorts to overdraft (Ways and Means financing) from the CBN to meet in-year cash shortfalls. At end of 2020, the stock of the CBN Ways and Means financing was estimated at N13.1tn or 8.5 per cent of the GDP,” it stated.

It, however, said that the Federal Government was making efforts to negotiate terms with the CBN in order to convert the stock of overdraft financing into a long-term debt instrument, which would lower the cost of debt for the government and enhance fiscal sustainability over the medium long term.

Economists have raised concerns over the rising debt profile of the Federal Government.

The PUNCH had exclusively reported that the Federal Government was planning to push its public debt stock to N50.22tn by 2023, with domestic debt at N28.75tn and external debt at N21.47tn.

This was according to the projections in the National Development Plan 2021-2025.

The Debt Management Office had disclosed that Nigeria’s public debt was N38tn as of the end of the third quarter of 2021, with the total debt stock rising by N2.540tn in three months between July and September 2021.

The NDP shows that the regime of the President, Major General Muhammadu Buhari (retd.), plans to accumulate about N12tn debt in two years from 2021 to 2023.

However, based on the plan, the government targets a reduction in total public debt by 2025.

A tabular illustration in the document shows the government targets N39.59tn debt stock for 2021, N46.63tn for 2022, N50.22tn for 2023, N50.53tn for 2024, and N45.96tn by 2025.

Analysts have agreed with the World Bank on the costly and vulnerable nature of Nigeria’s public debt.

The Fiscal Policy Partner and Africa Tax Leader of PwC, Mr Taiwo Oyedele, expressed his agreement with the World Bank’s assertion, highlighting the high cost of debt servicing.

He said, “I agree with the World Bank. Although the debt to GDP ratio is not too high, if you think about the debt service cost to revenue ratio, it is already over 70 per cent. That’s when you know it’s costly.

“Nigeria borrows at double-digit, and even when we borrow in dollars, the rates are very high and then you devalue the naira and the cost of servicing the debt in naira goes up because it is dollar-dominated debt.

“Put all of that together, and you can easily say to yourself that even though our debt to GDP ratio is very low, our cost of borrowing is unsustainable because it is very high, and therefore, make it very costly.”

He advised the government to have an integrated debt-revenue-expenditure strategy, which would address expenditure efficiency, terms of borrowing, and revenue optimisation.

He also advised the government to reconsider its priorities regarding its national budget.

A former Deputy Governor of the Central Bank of Nigeria and former presidential candidate, Kingsley Moghalu, also criticised the increasing borrowing tendency of the government, urging the officials to re-consider other ways of generating revenue for the country.

“There are many ways through which we can improve Nigeria’s domestic revenue situation without selling the future of our country. As to the argument that Nigeria does not have a debt problem but a revenue problem, that is mere sophistry. If you’re spending 90kobo of every one naira you earn repaying debt, you are insolvent.

“You cannot say that we have a debt-to-GDP ratio that allows you to continue borrowing. No! That is an argument for sustainable economies. You cannot be comparing Nigeria with advanced economies. We are in an economy that is still very basic.

“If you are not earning enough revenue, why are you borrowing? You are just compounding your problem. Why don’t you focus on where to get the revenue from instead of lazily ignoring that problem and just trying to survive with borrowing?

“If an individual was living a life that way, it would be a calamity. That is why Nigeria is in a calamitous situation today economically,” he said.

According to Moghalu, it is also not reasonable to borrow for infrastructural development as the government can expand the public-private partnership options for such development.

He said, “You cannot be borrowing for infrastructure. They should go and expand the PPP options for infrastructure.

“You don’t have to impoverish this country by borrowing. This is not sensible economic management.

“How sustainable economically are those infrastructures they claim to be building? Are they yielding enough money to pay back the debt?”

(PUNCH)

Business

KPMG Flags Five Major ‘Errors’ In Nigerian Tax Laws

Published

4 hours 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

4 hours 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.

Business

14 Nigerian Banks Yet To Meet CBN’s Recapitalization Deadline [FULL LIST]

Published

17 hours ago

January 9, 2026

Editor

With barely eleven weeks to the Central Bank of Nigeria’s (CBN) recapitalisation deadline, fourteen banks are yet to meet the requirement.

This comes as DAILY POST reports that 19 Nigerian banks had met the apex bank’s recapitalisation requirements as of January 6, 2025.

The banks that have complied with the CBN’s minimum capital benchmark include Access Bank, Fidelity Bank, First Bank, GTBank (GTCO), UBA, Zenith Bank, and twelve others.

However, as of the time of filing this report, fourteen Nigerian banks are yet to comply.

The banks that have not met the apex bank’s recapitalisation requirement include First City Monument Bank (FCMB), Unity Bank, Keystone Bank, Union Bank (Titan), Taj Bank, Standard Chartered Bank, Parallex Bank, and SunTrust Bank.

Others are FBH Merchant Bank, Rand Merchant Bank, Coronation Merchant Bank, Alternative Bank, and other non-interest banks.

Meanwhile, financial experts have predicted possible mergers and acquisitions ahead of the March 31 deadline.