The Budget Office of the Federation has stated that contrary to media reports of Nigeria having a debt problem, Nigeria’s revenue to GDP ratio is one of the lowest in the world, which is an underlying cause of the debt service to government revenue ratio.
This was disclosed by the Director-General of the Budget Office, Ben Akabueze in an interview with Arise TV on Tuesday.
He added that cutting back on government expenditure will have major medium-term effects.
What Akabueze is saying
Akabueze stated that as regards the indices of debt sustainability, Nigeria’s debt is okay until you get to the matter of debt service to revenue.
“That’s where we look really bad and testing limits of sustainability. We need to address this revenue problem and do so quickly, because if we do not, we would be faced with a real debt crisis.
“We are not resorting to cutting back expenditures because today’s GDP expenditure to GDP ratio is the lowest in Africa and amongst all developing countries except failed states.
“We are not in a place where FG is spending too much money. We are in a place where FG is not spending enough. That’s why social sectors are not liquid enough, not to talk of deficit to infrastructure.
He added that “Cutting back on expenditure is not a sustainable solution, because it has medium to long term effects, and there is a need to focus on revenue. When you look at revenue to GDP ratio, we are there at the bottom.”
He noted that for most countries around the world, the principal source of funding for government is taxation, but that’s not the case in Nigeria.
“The top 1 million taxpayers in South Africa pay more taxes than the total Nigerian taxpayers, and we need to focus on the root cause of the problem which is public revenue,” he added.
What you should know
- Nairametrics reported in July that the Ministry of Finance, Budget and National Planning stated that Nigeria’s debt service cost surpassed its revenue in the first four months of the year. Notably, debt service gulped a sum of N1.94 trillion between January and April 2022, against a retained revenue of N1.63 trillion.
- This is contained in the 2023 – 2025 MTFF/FSP report, presented by the Minister of Finance, Dr. Zainab Shamsuna Ahmed.
- According to the report, as of April 2022, a sum of N1.63 trillion was earned as the federal government retained revenue, accounting for 49% of the prorated target of N3.32 trillion. This is significantly lower than the projected revenue of N9.97 trillion for the entire year.