Analysts at Financial Derivatives Company (FDC) have said that the crash in price of crude oil following the price war between Russia and Saudi Arabia would affect Nigeria negatively as the debt service-to-revenue ratio is set to spike. Nigeria’s debt-to-revenue ratio presently stands at over 60 percent.
They made this position known in a report titled: “Supplementary Budget – Is Nigeria Ready for the Pain?”. The Report said: “FGN response to the oil price slump is a step in the right direction. However, lower oil price means that Nigeria’s risk premium will rise, and so will the cost of issuing new debt instruments – domestic and foreign. This will alter Nigeria’s debt profile negatively as the debt to revenue ratio will spike.
“However, the new ratio will still be within acceptable standards. The downward revision of the economic outlook from stable to negative will make the cost of additional borrowing steep and expensive.”
