The Director General of the Debt Management Office (DMO), Ms. Patience Oniha, has restated the need for appropriate fiscal policies and actions to improve the nation’s revenue generation capacity and sustainable growth of the country.
The debt management expert, who noted that Nigeria’s debt to GDP ratio at below 25% remained among the lowest globally and that the nation;s debt service to revenue ratio in 2022 reached 100%, lamented that the ugly fiscal situation was not desirable for the good governance
Oniha, who made these remarks during a Technical Roundtable on Economic Blueprint for President Tinubu’s administration organised by Actionaid Nigeria, maintained that the removal of fuel subsidy and tweaking of monetary policies were desirable but also constituted uncomfortable steps needed to dismantle the roadblocks to unlocking more funds for the economy and insulate it from crashing.
She said: “As many of you are aware, the debt stock has grown but it is important to understand the reasons behind this growth. Subsidies are an expenditure item in the budget, thus invariably, they contribute to the budget deficits.
“On the other hand, the Naira exchange rates used for the budgets are the official rates, which we all know are much lower than the open market rates, the effect of which is lower revenue. Overall, these two policy stances that were maintained over many years, contributed to consecutive budget deficits which were financed by an average of 90% through borrowings.
“For instance, the size of the 2023 Appropriation Act (budget), is about N21 trillion with a deficit of N11 trillion to be financed by new borrowing of over N9 trillion.
“The reversal of these policies has resulted in much higher revenues for all tiers of government. In June and July 2023, the funds distributed by the Federal Accounts Allocation Committee (FAAC) were over N907 billion and N1.959 trillion respectively, compared to between N500 billion and N750 billion previously.
“This indicates that the issue lies with our revenue. Unfortunately, the focus on revenue improvement previously did not change the outcomes significantly. The recent quick actions to bring revenue to the fore by the current administration are steps in the right direction.
“My main message here is that we cannot discuss growth, development, or debt without giving due consideration to revenue. It is now imperative that we confront revenues and take decisive actions to further strengthen our revenue streams from all sources. We expect to see improvements in revenues from the work of the Committee on revenues set up by President Tinubu”, the Director-General added.
