Lagos, Dec. 5, 2022 – Ms Patience Oniha, the Director-General of Debt Management Office, says Nigeria’s public debts stock is growing out of sustainability.
Oniha, who spoke at the annual conference of the Capital Market Correspondents Association of Nigeria (CAMCAN) in Lagos at the weekend, said Nigeria was now facing the risk of being unable to sustain its rising public debt stock.
Nigeria’s public debt stock, both external and internal, stood at N42. 84 trillion ($103. 31 billion) as at June 30, 2022.
She said it was important that the public debt be kept sustainable and advised the federal government to keep the debt stock within manageable limit.
Oniha warned that while Nigeria’s loans might still be within acceptable range of the country’s economic size, the country’s ability to sustainably meet the debt obligations is now under threat.
Oniha said beyond keeping within debt-to-GDP ratio, it is important that the public debt is sustainable and government is able to service its debt without the risk of distress.
Nigeria has been using more than three-quarters of its revenues to service debts.
Debt-service to total revenue ratio stood at 61.3 per cent in 2020, rising to 90.9 per cent in 2021 and currently stands at 84.5 per cent.
Debt-service-to-total revenue was about 32.7 per cent in 2015.
“Nigeria’s public debt stock has grown consistently over the past decades and even faster in recent years. Consequently, debt service has continued to grow,” she said.
She said the debt service-to-revenue ratio was too high, stressing that dependence on borrowing in the face of low revenue base was now threatening debt sustainability.
Oniha said that Nigeria’s low revenue base compounded by dependence on crude oil had resulted in budget deficits over the past decades, putting pressure on the country’s debt sustainability.
“The outlook shows that both the local and international markets are becoming tighter and interest rates are rising, thus priority should be less on borrowing and more on revenues from oil and non-oil sources,” Oniha said.
She said while efforts at increasing non-oil revenue are yielding positive results, urgent actions are required to moderate the level of new borrowings and ensure that the public debt is sustainable.
She outlined that government should, as a matter of urgency, rationalise expenditure and accelerate the growth in revenues, including implementation of strategic actions to boost tax administration and efficiency.
She said it was unacceptable that Nigeria has the lowest revenue-to-GDP ratio among a list of country sampled by the World Bank, noting that an efficient tax administration would ensure greater compliance to remittances devoid of all forms of evasions in the system.
According to her, most countries around the world have placed more emphasis on taxation as a principal source of funding for the government while reverse is the case in Nigeria.
Oniha advised that borrowing should be tied to projects and some of the projects should generate commensurate revenues to service loans used to finance them.
She called for sale of government assets to unlock funding, adding that physical assets such as idle or underutilised properties could be redeveloped for commercialisation to generate revenue. (GBN)
