The Director-General of the Debt Management Office, Ms. Patience Oniha, has projected that ongoing Federal Government’s efforts to enhance the nation’s revenue through current fiscal reform initiatives could help in reducing the nation’s debt service ratio to GDP by 20% in the medium-term.
Oniha, who made this projection on Wednesday during an interview with Bloomberg, lauded the President Bola Tinubu-led administration for the fiscal and tax reform measures in view of hthe revenue generation benefits to the country.
She said: “One of the things that this administration has taken on very early in the day is how to grow revenue…..We need to grow revenue.”
President Tinubu had hinted of plans by his administration to increase the country’s revenue to 18% of the GDP in the next few years and to achieve the target, he had set up a Fiscal Policy and Tax Reform Committee to streamline the revenue collection processes, particularly to block leakages from the entire value chains.
The World Bank currently estimates Nigeria’s tax-to-GDP ratio at 7% but the Federal Inland Revenue Service estimates it to be about 10.86%, making the country’s tax-to-GDP ratio one of the lowest globally and below Africa’s average.
The DMO recently reported that Nigeria’s total public debt stood at N87 trillion and servicing the debt costs up to 96% of the nation’s revenue as of 2022 and the figure is expected to increase to almost 60% of the country’s GDP, thereby putting Nigeria at the same debt-to-GDP ranking as countries like Canada.
About 60% of Nigeria’s external debt, amounting to about $41 billion as of June this year, comprised concessional and semi-concessional loans, which are secured at relatively low-cost, and they do not all mature at the same time.
Also, over 70% of the country’s domestic loans are distributed across various maturities ranging from three to 30 years.
Even then, the DMO has consistently maintained that the country’s debt profile is sustainable considering its structure.
This distribution is facilitated by a well-established domestic bond market that allows the government to issue securities. Nigeria also benefits from a substantial investor base and a thriving pension fund industry.
