From Uche Usim, Abuja
The Director General of the Debt Management Office (DMO), Ms. Patience Oniha, on Thursday, described the poor revenue status of the country as a great threat to its debt sustainability efforts, calling for an urgent and pragmatic approach to solving the challenge.
Oniha made the suggestion during her presentation at a workshop for members of the Senate Committee on Local and Foreign Debts and House Committee on Aids, Loans and Debt Management.
She also pinned the poor debt sustainability nightmare on spiked interest rates both at the domestic and international capital markets, thus making loans more expensive and debt service more crippling.
She said: “Debt has grown. We can’t deny it because that is the fact but we all know why. Revenue base is low and we often don’t achieve annual revenue targets in the annual budgets. Even if we achieve the revenue targets 100 percent, they are still too low for a country the size of Nigeria.
“We have been dependent on borrowing as a country for a very long time. We have been borrowing because the revenue base is low. Because the revenue base is low, it is now threatening debt sustainability.
“We need urgent actions to moderate the level of new borrowing because debt services/revenue ratio would have been low if the revenue base had been very strong.
“There has been a lot of talk about raising revenue. We now need urgent actions. We need a stronger revenue base to ensure that our debt remains sustainable.
“We have been able to raise the domestic borrowing and external borrowing to fund the government budget. But going forward, things are getting tight in the market. What Russia has done (invasion of Ukraine) has shaken the global system- with interest rates going as high as 10 percent in some developed economies where such high rates have not been seen in about four decades.
“Interest rates have gone up across the globe. When interest rates go up, the cost of borrowing goes up and that has implications for the cost of borrowing”.
The DMO boss emphasized, under normal circumstances, that the nation’s economy should be growing at a much higher rate than it is now, adding that hands, including the three arms of government, must be on deck to sail the Nigerian economic ship out of the tempest. This, she said, should be done by supporting efforts of the fiscal authorities to raise revenue from various sources.
“We need to accelerate revenue growth. We need between 5 per cent to 10 percent growth rate. The loans we took, some were applied to specific projects. For instance, some were targeted at rails, roads and airports. Some of these services should generate revenue commensurate with the services rendered. There is hardly anywhere you go in the world where you won’t see tolled roads, for instance.”
Ms. Oniha said that train fares were extremely cheap and wondered if that would help the country to quickly repay the loans taken to build such rails.
She noted that the Ministry of Works was working on a polling policy along major highways and that such a policy should be supported.
The DG said that the legislature and other Nigerians should objective consider the sale of government assets, which has been suggested by some analysts who argued that the nation should sell some of the public assets, to raise funds for public expenditure.
She further pointed out that in the face of high annual budget deficit, the government still faced pressure from labour for increased personnel expenditure and that the legislators should bear in mind that if the government yielded to such pressures, it would translate to higher deficit.
“If the executive says we cannot accommodate subsidies and the legislature bows to pressure, (to retain fuel subsidies) you are increasing the deficit. If the executive introduces Communications Tax and you say ‘No’, you are reducing the revenue base.”