Despite concerns about Nigeria’s rising debt profile, the Convener of Borrow Right Africa, Taiwo Akerele has stated that the key issue with the country is revenue mobilisation, which is affecting the capacity to service debts.
He argued that Nigeria’s debt profile, which is estimated at above $80bn together with the external debt of $30bn, is about 20 per cent of the country’s Gross Domestic Product, which he said, is still low when examined from the stand point of the globally accepted debt sustainability framework (DSF).
According to him, people categorising Nigeria as a heavily indebted country are driven by ignorance of principles governing international lending and borrowing by countries from development finance institutions.
Akerele, who is also the Country Representative of Policy House International, said while he does not subscribe to reckless borrowing, he believes that the role of citizens under international citizens’ engagement principles, is to hold the government to account for borrowed funds and impact targeting.
He maintained that the key issue for Nigeria is revenue mobilisation and not debt overhang, saying when compared to the percentage of the size of the economy; the country’s revenue mobilisation capacity is weak.
He added that the informal sector is operating at less than 25 per cent in terms of input into the national revenue, coupled with the leakage in institutional revenue flows.
He stated that Nigeria’s tax to GDP ratio is actually one of the lowest in Africa standing at less than 100 per cent from IMF reports, saying this can be improved upon with every sense of urgency.
Akerele said: “Based on the above, there is a strain on debt service, which drains our limited revenue capacity. It is this strain on debt service that appears to make the present debt profile seem unsustainable and creates an atmosphere of insolvency, which is far from it.
“In summary, we need to ‘progressively’ deploy our economic management tools such as our fiscal policy (taxation and spending) and monetary policy, such as inflation and quantitative easing measures to redirect purchasing power, control inflation, and strengthen taxation such that government is able to manage its debt profile while ensuring economic growth simultaneously,” he added.
He urged Nigerians to focus more on the performance of the debt incurred, make inputs into the application of funds processes.
In addition to a performance audit of previously incurred debts, Akerele said Nigeria is still at the internationally accepted debt sustainability threshold.