Nigeria’s President, Bola Tinubu has insisted the practice of servicing national debt with 90% of revenue is destructive while promising to deviate from that path.
The President disclosed this while giving the opening remark at the annual Nigeria Bar Association’s (NBA) conference in Abuja themed, “Getting it Right: Charting the Course for Nigeria’s Nation-Building”.
The President said, “Can we continue to service external debts with 90% of our revenue? It is a path to destruction. It is not sustainable. We must make the very difficult changes that are necessary for our country to get up from slumber and be respected among the great nations of the world.”
Reforms will create short-term discomfort
The President alluded to making hard reforms to veer the country off that unsustainable path. He noted that these reforms might create short-term negative impacts on Nigerians but encouraged citizens to put future generations above short-term comfort.
In his words, “We cannot have the country we desire without the reforms we have initiated. It is painful at the beginning, in the short and medium term, but we must do what we have to do to take this nation to its great destiny.”
“It is not about you, and it is not about me. It is about our generations yet unborn, for whom we must bequeath a great and prosperous country.”
What you should know
In the World Bank’s fiscal economic outlook for Nigeria in April 2023, the bank noted that Nigeria spent around 96% of its revenue on debt servicing in 2022 up from around 80% in 2021. This the bank says is unsustainable.
It said thus,
“The fiscal deficit was estimated at 5.0% of GDP in 2022, breaching the stipulated limit for a federal fiscal deficit of 3 percent. This has kept the public debt stock at over 38 percent of GDP and pushed the debt service to revenue ratio from 83.2 percent in 2021 to 96.3 percent in 2022.”
According to Nigeria’s Debt Management Office (DMO), in 2023 so far, Nigeria’s debt to revenue ratio stands at 73.5% which it says is beyond the recommended threshold of 50% and therefore unsustainable.
Beyond that, the DMO also recommends that the FG increase revenue from its projected N10 trillion in the 2023 budget to N15 trillion.
“Attaining a sustainable FGN debt service-to-revenue ratio would require an increase of FGN revenue from N10.49 trillion projected in 2023 budget to about N15.5 trillion,” it said.
