Speaking in London on Wednesday, Finance Minister Taiwo Oyedele said the federal shortfall should finish under the 4.2% of GDP target set late last year. "We think it will be narrower than the 4.2%," he said, adding that the key focus is how debt-service costs stack up against revenue, which "already is moving in the right direction." The government plans to revise the forecast and set a new target after its review. As Oyedele put it, "We don't think it will be worse than the target; we think it will be better."
Nigeria, the continent's largest oil producer and refiner, expects the federal picture to diverge from the broader public sector.
Nigeria's total public debt, covering both domestic and external borrowing, rose 21% from a year earlier to $121 billion as of June, based on the debt agency's latest data. In September, the central bank reduced the benchmark policy rate by 3.5 percentage points to 23%. Short-term yields fell to their lowest levels of the year following the reduction, then moved higher this month. Separately, the average sovereign-bond yield declined for a sixth straight session to 16.5% on Wednesday.
According to the World Bank, the combined public-sector balance - covering state and local authorities - will enlarge this year. It attributes the slippage to expanded state capital programs and increases in federal personnel costs, interest obligations, and pre-election spending that more than outweigh stronger revenue.
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Oyedele pushed back on debt concerns after World Bank figures indicated that in the first half, interest outlays were 24% higher than federal government revenue. The Finance Ministry said that view inflates the burden because the interest line includes amounts paid on behalf of other tiers of government, while the revenue tally leaves out some receipts. At a Chatham House event, he said, "We have some of our revenues that haven't been captured," and he said the deficit ratio should fall as revenue rises and interest expenses ease.
In plain English: Abuja says the federal deficit is tracking better than planned, while the combined public-sector gap could still get larger this year. Rates were cut to 23% and average sovereign yields slipped to 16.5% on Wednesday, even as total debt reached $121 billion. The bottom line: watch for the government's revised deficit target and the path of short-dated yields as guides to near-term pricing of Nigerian risk.
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