Government links underperformance of economy to revenue problems — Business — The Guardian Nigeria News – Nigeria and World News
The federal government has linked the economy’s underperformance to revenue-generating constraints, saying it needs to borrow to fill the budget gap for development projects, improve businesses and improve citizen standards. .
The Director General of the Federation’s Budget Office, Ben Akabueze, expressed concern over the country’s growing debt profile and assured that the government would reduce debt servicing costs to free up enough resources for the programs that would enhance development.
Akabueze, who was represented by his technical adviser, Prof. Olumide Ayodele, spoke on “National Debt Burden: Causes, Effects and Realistic Economic Solutions”, at the 46th Annual Conference of the Institute of Chartered Secretaries and Administrators of the Nigeria (ICSAN) .
Stating that the focus of the conference was appropriate and timely to help the government address major fiscal challenges, he mentioned that the government debt of 32.9 trillion naira in 2020 increased to 39.6 trillion naira in 2021 with total government debt standing at N41.6. billion in March 2022, while debt service stands at $7.7 billion in 2021, compared to $6.4 billion in 2020.
According to him, because public debt is largely domestic, debt service accounts for a large share of debt.
He said that although the level of public debt is high in Nigeria, the budget office is of the view that public debt remains moderate and within sustainable limits by international standards.
On what the government has done to manage the debt, he said the government’s objective is to maximize domestic borrowing using longer-term instruments and to maximize financing from concessional sources, multilateral and bilateral windows. while replacing external borrowing with longer-term domestic borrowing. in a way that would not crowd out private sector investment.
Furthermore, he said the government was focusing on issuing promissory notes to settle arrears with key reforms to improve revenue collection, which he said are yielding results with significant improvements in non-oil revenue. .
“Improved revenue collection will significantly reduce deficits and the need to borrow and debt service burden,” he said. It is important to ensure that public debt is sustainable, revenue needs to be strengthened, and expenditure management needs to be improved and stem revenue leakages.
“At the end of 2021, public debt, as a ratio of 23%, is within the threshold of 55% recommended by the IMF and the World Bank and is well below the convergence threshold of the monetary zone W / A of 70% and our self-imposed limits of 40 percent.
In addition, the exposure of the public debt portfolio to currency risk is also moderate, as external debts represent around 40% of total debt in 2021 and the target ratio for 2023 is 30%.
He mentioned some measures to urgently avert the country’s growing debt crisis, saying immediate implementation of Steve Oronsaye’s report was essential to reduce the cost of governance.
He said the government’s medium-term goal was to raise the revenue-to-GDP ratio from 8% to 15% by 2025.
According to him, the government is introducing measures to reduce recurrent expenditure and limit spending by public enterprises to around 50 percent.
This, he says, is about reducing waste and better managing expenses.
ICSAN Chairman and Chairman Taiwo’ Gbenga Owokalade, who expressed concern over the country’s current debt profile, said it boded a bad omen for progress, development and sustainability from the country.
He said national sustainability cannot be spoken of if the nation can only survive by taxing the resources that should be available for the future.
Noting that Nigeria was struggling to service debt interest and repay principal, he said that with the grim statistics depicting such huge budget deficits, there was no denying that the case had come to a head.
According to him, while it is remarkable that getting into debt is not in itself a negative development, the size of the debt in relation to the national income, as well as the nature of the projects to which the loans obtained are applied constitute relevant questions for consideration. serious.
He said: “The relevant questions now are ‘Is the borrowing spree sustainable? How do you free yourself from this debilitating burden of debt? What governance model can we adopt to get out of this debt trap and succeed in delivering growth and development? One can go on and on with these types of questions that revolve around the perplexing debt riddle.
“A good thing, as the theme itself suggests, is that we are not only here to identify the roots and causes of the problem, we are even more determined to distill from our discourse and reflect today to the practical solutions that we can offer our many stakeholders in the form of recommendations.