By Chinwendu Obienyi
Nigeria must start prioritising expanding its revenue base, reduce the size of government to curtail recurrent expenditure, ensure proper deployment of borrowed funds and unlock dead assets to prevent falling into another debt trap.
According to experts who proffered solutions on how Nigeria can get out of Economic crisis during the Nairametrics Economic Roundtable webinar held at the weekend, the nation’s development trajectory would improve if more informal firms are formalised and focus should be dedicated on the way revenue is spent.
This is coming after the Debt Management Office (DMO) had announced the Transaction Advisers for the issuance of the proposed $6.2 billion (N2.3 trillion) Eurobond offer expected to partly plug the over N6.8 trillion 2021 budget deficit. The Budget Office had published the approved supplementary budget of N982.7 billion, which brought FG’s total budget for 2021 to N14.8 trillion (from N13.8 trillion) – translating to an increase of 45.6 per cent over the actual budget for 2020 (N10.1 trillion).
The supplementary budget comprised N859.4 billion capital expenditure, designated to boost military operations and facilitate the procurement of 29.9 million doses of COVID-19 vaccine, while the balance (N123.3 billion) was to fund non-debt recurrent expenditures.
Although the rationale for the supplementary budget is compelling, given the high level of insecurity and weak vaccination (0.8 per cent of the population), the weak revenue performance of the FG may result in worsening the debt sustainability in the near term.
Afrinvest, in its weekly economic assessment noted that they project FG’s actual revenue for 2021 to settle around N5.8 trillion (budgeted: N7.9 trillion), while adding they estimate debt service to print around N3.7 trillion (budgeted: N3.1 trillion).
“This will translate to a debt-service-to-revenue ratio of about 63.8 per cent, as against 35.2 per cent stipulated in the budget. Hence, we recommend that the FG prioritise expanding its revenue base, reduce the size of government to curtail recurrent expenditure, and ensure proper deployment of borrowed funds to prevent falling into another debt trap”.
The Managing Director, Financial Derivatives Company, Bismarck Rewane, stated that the fact that the current administration is running a fiscal deficit is not entirely a bad thing as it is in line with the Keynesian school of thought, meant to stimulate growth in a recessive period.