As the Vice President Professor Yemi Osinbajo, leads Nigeria’s delegation to the United States of America for another talk show on economic rejuvenation, World Bank Group President, David Malpass, has pointed out that Nigeria’s economic challenges are more of internal than external.
Malpass noted that staggered exchange rates and over bloated fuel subsidy are key areas to be addressed by the All Progressives Congress (APC)-led government.
Professor Yemi Osinbajo met the World Bank Group President as part of efforts to seek the multilateral institution’s support to end petrol subsidy which has become a drain to Nigeria.
The meeting, which took place in Washington, was disclosed in a statement posted on the World Bank’s website.
During the meeting, Malpass emphasised the important need for a decisive move toward exchange rate unification and stabilisation by Nigeria.
“President Malpass emphasised to Vice President Osinbajo that a unified exchange rate will significantly improve the business enabling environment in Nigeria, attract foreign direct investment, and reduce inflation.
“President Malpass and Vice President Osinbajo also discussed the importance of increasing domestic revenues through broadening Nigeria’s tax base and increasing the efficiency of tax administration,” an official statement stated.
The World Bank chief also pointed out that Nigeria, for the first time since its return to democracy and as the only major oil exporter, hasn’t been able to benefit from the windfall opportunity created by higher global oil prices presently, due to its rising petrol subsidy burden.
Meanwhile, the Director-General of the Debt Management Office (DMO), Mrs. Patience Oniha, has confirmed that Nigeria’s total debt profile as at March, 2022, stood at N41.60 trillion.
Oniha said this during her appearance at the ongoing engagement on the 2023 – 2025 Medium Term Expenditure Framework (MTEF) and Fiscal Policy Paper held by the House of Representatives Committee on Finance yesterday. She attributed Nigeria’s high debt profile to shortfall in revenues and the deficit in the annual budget as approved by the National Assembly. These, according to her, increased the debt stock of the country.
She revealed that, “as at December 2020, the debt stock of Nigeria and that includes the federal, state governments and the Federal Capital Territory was N32.92 trillion. By December 2021, it was N39.556 trillion. As at March of this year, we published quarterly, it was N41.6 trillion. On the average, the federal government is owing about 85 percent of the total debt.
“We have been running deficit budget for many years and each time you approve a budget with a deficit, by the time we raise money, because when you approve it is giving us a mandate, authority to borrow, it will reflect in the debt stock, so the debt stock will increase. Also note that states are also borrowing. So we add their own. They also have laws governing their borrowings and as debt stock increases so does debt service.
“Until the issues of personnel, overhead and capital expenditure are properly addressed in the budget, borrowing would not stop.”
Speaking further, she said, “a World Bank report showed that in terms of debt-to-GDP ratio, Nigeria is low but for debt service-to-revenue ratio, we are very high. So, if you look at tax-to-GDP ratio of these other countries, they are in multiples of Nigeria.”
According to her, the World Bank survey report of about 197 countries revealed that Nigeria was 195, meaning that the country was only able to beat two countries and that was Yemen and Afghanistan, “and I don’t think we want to be at those places.”
“When the MTEF for 2021 to 2023 was being prepared, it is to say, let’s begin to look at revenues because as debt is growing, debt service is increasing. So, the language we used is for debt to be sustainable in the medium term.
“Sustainable means you can service your debt without difficulty, without it consuming all your revenues because you have very little for other projects. You must look at revenues very closely and I think the discussions you have had with the Customs is one part of it.
“There are many other revenue generating agencies. So, we must increasingly begin to look out our revenue for funding our activities as opposed to deficit.
“We talked about N11 trillion deficit and borrowing for 2023, how much is the revenue there? When we looked at the first tranche that was N10 trillion for full year of subsidy and N9 trillion for subsidy next year and the size of the borrowing was 62 per cent of the budget.
“The responsibilities, I think, are on both sides. Query the various expenditure lines and see what it is we can handle. So, if the deficit is lower, the borrowing will be lower and that’s how to grow on a slower pace,” she added.