The Centre for the Study of the Economies of Africa (CSEA) has again lent its voice on the growing calls by financial and economic experts on the need for Federal Government to check the nation’s rising debt stock in order to avert plunging the country into debt distress.
The experts’ concern came barely a few days after the Debt Management Office (DMO) flawed the International Monetary Fund’s (IMF’s) projection that Nigeria might spend over 92 percent of its revenue on debt servicing in the 2022 fiscal year.
The Washington D.C-based institution, which made the projection in its recently published 2021 Article, also estimated that the country’s 2021 debt servicing-to-revenue ratio stood at 85.5 percent.
However, the IMF estimated that the debt-servicing-to-consolidated revenue (total revenues of the government and its agencies) for 2021 and 2022 at 29 percent and 32.8 per cent, respectively.
Reacting to the IMF’s stance on Nigeria’s debt issue in a statement, the DMO Director-General, Mrs Patience Oniha, faulted the IMF report as well as a similar one published by Pan-African Credit Rating Agency – Agusto & Co relating to the country’s debt servicing-to-revenue estimates.
Specifically, the debt management expert stated that both reports failed to consider the challenges experienced by Nigeria in recent times and the fiscal and monetary policy initiatives of the government to address those challenges.
However, economists at CSEA pointed out that the continuous rise in debt suggests that government revenue was lesser than government spending, thereby pushing the government to borrow and accumulate debt
The research firm, in its latest CSEA’s weekly newsletter – Nigeria Economic Update No 5, reported that data from the Debt Management Office (DMO) show that Nigeria’s total public debt was N38 trillion in the third quarter of 2021, and domestic debt constitutes about 59 percent of total debt.
According to the CSEA, the debt stock increased by 9.52 percent year-on-year whereas on a quarter-on-quarter basis, the debt stock rose by 6.99 percent.
The experts cautioned: “The continuous rise in the country’s debt profile if unchecked, might leads to unsustainable debt and debt distress.
“Consequently, debt service management strategies such as debt for development swaps – that is the provision of debt relief in exchange for investments in key development sectors – should be considered by the government to reduce overall debt and at the same time provide additional resources to the government.
“Also, there is a need for the government to strengthen digital tax infrastructure that would make tax payment easier, thereby expanding the tax base through voluntary tax payment, and increasing tax revenue”, the CSEA stressed.
