Nigeria spent 86 per cent of its revenue on servicing debt in 2021, but South Africa spent only 20 per cent of its receipts on the same purpose, according to Punch.
The International Monetary Fund’s 2021 Article IV estimates show Africa’s most populous nation spent 85.5 per cent of its revenue on servicing the debt in 2021.
But, South Africa’s budget office, situated in the National Treasury, estimated its debt service-to-revenue in 2021 at 20 per cent, explaining that for every five rand raised by the government, only one rand was spent on servicing debt.
By end of December 2021, Nigeria’s total debt was only 30 per cent of South Africa’s debt, yet the former’s debt service appears too expensive, according to analysts.
Nigeria’s total debt as at December 2021 was $94.166bn, according to the Debt Management Office, but South Africa’s total debt at the same period was $261bn, according to the country’s National Treasury and Bloomberg.
Latest estimates by the National Bureau of Statistics show Nigeria is the continent’s largest economy and put the nation’s economic size at $420bn. On the other hand, South Africa is second largest economy on the continent with an estimated size of $320bn.
Analysts say Nigeria’s debt service is very expensive because of the perception of investors of the country as high risk.
The Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Dr Muda Yusuf, said that debt service ratio was a function of the magnitude of the debt and its cost.
“If the amount you are borrowing is high, you also have to pay more. Also, Nigeria borrows at expensive rates, especially the Eurobonds. Sometimes, we celebrate that our Eurobonds are oversubscribed, but the yields are very high when you compare them with other countries,” Yusuf said.