28 March 2019: Yesterday, Zainab Ahmed, Nigeria’s Minister of Finance announced the plans of the Federal Government to fund the 2019 budget through a mix of local and international borrowing, with a focus on long-term concessionary loans. Notably, the minister also stated that the FG would be seeking to rebalance its debt portfolio to an even split between foreign and domestic loans, an adjustment to its initial plan of a 40:60 split in favor of domestic borrowings. Analysts note that this is a continuation of the current administration’s blueprint to fund capital expenditure through borrowing, with a focus on reducing the level of more expensive local debt in favor of currently cheaper foreign debt. 

More concerning for the Nigerian economy however, is the government’s struggles with improving revenue, as diversification efforts have not garnered significant traction yet, with debt servicing costs eating up a large portion of the slow-growing revenue. With the blueprint seemingly tilted towards debt financing, analysts comment that shoring up revenues have to become a key focus for Nigeria in order to avoid a crowding out of revenue by servicing costs. 

Reporting for EasyKobo on Thursday , 28 March 2019 in Lagos, Nigeria

Source: Vetiva Capital Management Limited