Economists have warned the Nigerian government to stop borrowing, just as the Director-General of the Debt Management Office (DMO), Mrs Patience Oniha, confirmed yesterday that Nigeria’s debt profile as of March 2022 stood at N41.60 trillion.
Patience Oniha, during her appearance at the ongoing engagement on the 2023 – 2025 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP) held by the House of Representatives Committee on Finance, yesterday, attributed Nigeria’s high debt to a lack of revenues and approval of a yearly budget with a deficit by the National Assembly, which increased the nation’s debt stock.
She felt disappointed that the country has been running a deficit budget for many years with an increased level of borrowing, especially since the outbreak of the COVID-19 pandemic, and emphasized that the only way out of the problem is improved revenue generation.
She said: “As of December 2020, the debt stock of the federal, state governments and the Federal Capital Territory was N32.92 trillion. By December 2021, it jumped to N39.556 trillion. We publish quarterly, and as of March of this year, it was N41.6 trillion. On average, Federal Government is owing about 85 per cent of the total sum.
“We have been running a deficit budget for many years and each time you approve a budget with a deficit, by the time we raise that money because when you approve it, it is giving us a mandate, authority to borrow, it will reflect in the debt stock, so debt stock will increase. Also, note that states are also borrowing. So, we add their own.
“Until the issues of personnel, overhead and capital expenditure are properly addressed in the budget, borrowing would not stop.”
Continuing, Oniha said: “A World Bank report showed that in terms of debt to GDP ratio, Nigeria is low but for debt service to revenue ratio, we are very high. So, if you look at the tax to GDP ratio of these other countries, they are multiple of Nigeria.
“The World Bank survey report of about 197 countries revealed that Nigeria is number 195, meaning we beat only two countries and that is Yemen and Afghanistan. I don’t think we want to be like those places.
“You must look at revenues very closely for funding our activities as opposed to the deficit. We talk about the N11 trillion deficit and borrowing for 2023, how much is the revenue there? That’s one. When we look at the first tranche which was N10 trillion for the full year of subsidy and N9 trillion for the subsidy next year, the size of the borrowing was 62 per cent of the budget. That’s high. The responsibilities, I think, are on both sides. Query the various expenditure lines and see what it is we can handle. So, if the deficit is lower, the borrowing will be lower and that’s how to grow on a slower pace.”
Weighing in on the debt debacle, the Chief Executive of Economics Associates, Dr. Ayo Teriba, said it would be extremely difficult to achieve a balanced budget under the fiscal condition.
“Between January and April, we spent N4.7 trillion but made only N1.6 trillion in revenue. The deficit was more than N3 trillion. If you want to limit spending to revenue, you would spend only N1.6 trillion. And that would not cover interest payment, which was N1.94 trillion. So, there is no question of doing a cash budget,” Teriba said.
“Attract foreign investments to idle assets to generate revenue for the government. We have idle assets, underutilised infrastructure and companies whose market value we don’t know,”
“What we need to do is to increase the revenue. The debt to revenue is the major challenge. Once we increase revenue and growth, we can avert any crisis,”
“They are making people aware of it. They are trying to be efficient. One thing is to raise revenue, another is to block the leakages. If you block leakages, your increase impacts. There is the time between when we take actions and when we see the impacts,” he said, acknowledging that the administration has taken some steps.
