The Director-General of Nigeria’s Debt Management Office (DMO), Ms Patience Oniha, has allayed fears of some observers that the country was already in a debt crisis.
However, the debt office boss admitted that the nation was not generating enough revenue to fund some critical operations, but stressed that Nigeria was still capable of servicing her debts.
Ms Oniha, in a chat with newsmen on the sidelines of the International Monetary Fund and World Bank Group summit in Indonesia, noted that efforts were being done to avert a debt crisis in the Africa’s largest economy.
This, she said, federal government was doing by shoring up the revenue base by diversifying the economy.
“Debt crisis means you are no longer able to service your debts, which is what we are talking about. We can’t stop talking about it, the figures are there.
“I agree that we are not generating as much revenue as we should, but we are not in a debt crisis as many have feared,” Ms Oniha told journalists.
She said further that, “When you compare your revenue to your Gross Domestic Product (GDP), it is low and we cannot run from the fact that we need to generate more revenue.”
“Generating more revenue does not mean we should focus only on increasing production in the Niger Delta or praying for oil prices to rise, we have to generate long-term revenue. How do you generate that?
“You have to enforce compliance, which is all about increasing the tax base and making sure that those who are paying are paying the correct amount and not just paying a small amount to escape. The option that was talked about here about raising taxes,” she added.
Recall that earlier this month, analysts at FSDH Research had called on government to avert an imminent debt crisis in the country.
The firm had said in its report that the growth in Nigeria’s debt was higher than the growth in revenue, pointing out that Nigeria has the lowest government revenue to Gross Domestic Product (GDP) ratio at 6 percent among some selected countries.
According to the company, Nigeria’s over-dependency on crude oil revenue, combined with volatility in both the price and production of crude oil are the major reasons for sluggish growth in government revenue.
It said growing non-oil revenue will require that the Nigerian economic environment has inherent structures that can support business growth, noting that such structures include adequate physical infrastructure, policies, legal and regulatory frameworks that will make the economy business-friendly to generate taxable profits.
“Our analysis of the ratio of the interest payment on domestic debt relative to the FGN allocation from the Federal Account Allocation Committee (FAAC) shows that the FGN is spending too much of its revenue to pay interest on loans.
“This leaves the government with little resources to spend on critical sectors of the economy that could support strong growth and maintain a healthy economy to generate revenue,” it said.
FSDH Research said further that, “The current high interest payment relative to revenue may also increase the credit risk of the country. Although the government has been able to meet its debt obligations (interest and principal payments) so far, if the current situation is not addressed, the interest rate on government loans may increase because of the perceived elevated risk. This would also lead to higher interest rates for private sector operators.”
The firm disclosed that the external environment was becoming tighter than before because of the rising interest rate in the US.