The Director-General of Debt Management Office (DMO) Patience Oniha has revealed that Nigeria took loans to fund the budget and put more funds into the capital projects.
Nigeria’s total public debt stock is N21.73 trillion – as at the end of last year.
She spoke Monday at the International Monetary Fund (IMF) Regional Economic Outlook for Africa with theme: “Domestic Revenue Mobilisation and Private Investment”.
Oniha said with the level of reserves, oil production and population, Nigeria can’t be saying the country is an oil producing nation just like Saudi Arabia which is an oil producing nation.
She said Nigeria is miles apart with Saudi Arabia in terms of oil being a source of its revenue. “We have since realised we should not be benchmarking ourselves against these countries. We borrow because there is revenue shortfall. The National Assembly passed the budget last week and we know it was higher than what the executive presented. So, as a debt manager, what I am looking for is to see where the funding of that incremental size may come in from,” she said.
Oniha said the government will be borrowing to make up for that shortfall in budget. “All of government’s borrowings were targeted at infrastructure development. Without borrowing, we won’t be able to deliver on the budget and I think we should be clear about that and a lot of that went into capital,” she said.
She said Nigeria should not be focused on the debt to Gross Domestic Product (GDP) ratio adding that the debt strategy is targeted at not to crowd out the private sector.
Oniha said the decline in interest rate means that there are about N200 billion out there in the market for private sector to invest in. “You will also notice that we are retiring some of the treasury Bills as they mature. The main challenge I am giving to the private sector is that why is all these money still sitting where it shouldn’t be? Why has it not reached the private sector because that was the key objective of our strategy”.
The IMF’s Head in Nigeria Amine Mati said Nigeria and other countries in the Sub-Saharam Africa need three to five per cent Gross Domestic Product (GDP) growth to thive.
“We think that for the region, there needs to be three to five per cent GDP growth is needed. How do you get there? In Nigeria, you can remove a lot of exemptions and expand income taxes. If you look at all the various forms of taxation, you can take another look of property tax, then you can have tax administration and improving compliance. You know, in Nigeria, complying with many of the taxes is still very low,” he said.
He urged Nigeria to double tax compliance to GDP ratio from 25 per cent to 50 per cent. Such measure, he said, can make the difference in increasing revenue mobilisation.
He said raising growth is really key for the challenges ahead in Nigeria and Sub-Saharan Africa. “For the region as a whole, we can say the average growth rate on a per capita base is low. And a third of African countries, in 2017, with Nigeria as one of them, has seen a decline per capita GDP level. And we expect some of that to continue. To really make a difference, that trend needs to be reversed. So, the growth rate really needs to surpass its population growth to make a difference”.
He said the interesting characteristics are that non-resource countries have higher private investments. “Oil prices have gone up and this is an opportunity for these countries to really use the opportunity provided by the pick-up in oil price to initiate some reforms that would encourage more private sector investments,” he said.