Fitch Ratings, an international credit rating agency, has projected that Nigeria’s debt to revenue ratio will rise to 395 percent by 2022.

The debt to revenue ratio is used to measure what percentage of a country’s revenue is used to service its debt.

Between January and November 2020, Nigeria’s debt to revenue ratio was 89 percent.

In a note announcing Nigeria’s ‘B’ rating, Fitch said debt interest will consume 24 percent of revenue.

“General government (GG) debt will further rise to 32.6 percent of GDP in 2022, from less than 13 percent a decade earlier, but will remain much below the forecast ‘B’ median of 70 percent. The key challenge to debt sustainability stems from low fiscal revenue,” the note read.

“The picture is much weaker at the federal government (FGN) level, with forecast debt-to-revenue and interest-to-revenue ratios of 1,031 percent and 64 percent, respectively, in 2022, reflecting a higher share of the FGN in GG spending and debt than in GG revenue.”

It said Nigeria has not solicited any relief under the G20’s debt service suspension initiative adding that the benefit of joining the initiative would be small.

“We do not expect the government to request any debt relief under the G20’s Common Framework as the authorities attach high importance to access to international markets,” Fitch explained.

The ‘B’ rating, it said, is supported by Nigeria’s large size of the economy, a low general government debt-to-gross domestic product (GDP) ratio, small foreign currency (FX) indebtedness of the sovereign, and a comparatively developed financial system with a deep domestic debt market.

However, the rating is constrained by particularly weak fiscal revenue, comparatively low governance and development indicators, high dependence on hydrocarbons, and continued weak growth and high inflation.

The Cable