The federal government said it would redress the debt service imbalance ratio in the 2018 budget through improved non-oil revenue generation drive and restructuring of the existing debt portfolio.
Presenting the 2018 Budget proposal to the National Assembly on Tuesday, President Muhammadu Buhari said the government was concerned that domestic debt accounted for about 79 per cent of the total debt portfolio at the moment.
The president said the government’s medium-term strategy was to reduce the domestic debt proportion to about 60 per cent by the end of 2019, while increasing external debt to 40 per cent.
With total domestic debt figure currently in excess of N12 trillion, the Debt Management Office, DMO recently said the government’s new debt management strategy, DMS for the next four years would involve de-emphasising domestic borrowing and focusing on foreign loans.
Under the new DMS, government said it would be possible to get external loans at cheaper rates and avoid crowding out private sector investors who are looking for opportunities to borrow to finance their businesses.
“We are closely monitoring our debt service to revenue ratio,” the president said.
“Rebalancing our debt portfolio will enhance private sector access to domestic credit. In addition, annual debt service costs will reduce as external debts are serviced at lower rates and repaid over a longer period than domestic debt”, Mr. Buhari said.
On management of oil revenue, the president said despite declining oil earnings as a result of the drop in global oil prices, his administration was able to invest additional $500 million to the $1 billion used in establishing the Sovereign Wealth Fund, SWF in 2011.
With oil price rising on Monday to a new high of an average of $64 per barrel, the first time in several years, the government believes the budget has taken off on a positive note.
Also, with oil benchmark at $45 per barrel, the government says if the current environment is sustained, more money would become available for more transfers to the Fund for infrastructure development.
Describing the investment as a demonstration of his government’s determination to maintain a stable and secure economy, the President said the government would continue to strive to lay a solid foundation for the future prosperity of successive generations in the country.
He said the Nigeria Sovereign Investment Authority, NSIA, was directed to build on its successes so far, by looking inward and investing locally, particularly in the agricultural sector, to support government’s inclusive and diversified economic growth plan.
The President said interventions by the Central Bank of Nigeria, CBN, to improve access to liquidity, discourage currency speculation and increase net foreign exchange inflows had restored stability in the market.
Consequently, as at the October 30, the stable foreign exchange environment boosted the country’s external reserves to about $34 billion, with exports significantly outpacing imports, resulting in a trade surplus of N506.5 billion by the second quarter of the year.
Besides, he said the stability in the FOREX market would support the government’s efforts to create the enabling environment for micro, small and medium-sized enterprises, investors, manufacturers and exporters, to grow their operations and provide jobs.
On revenue, President Buhari said although the country’s economy was diversified, with non-oil sector accounting for over 90 per cent of total nominal gross domestic product, GDP, ”the government’s revenues were not as diversified yet.”
“Our tax-to-GDP ratio of about 6 per cent is one of the lowest in the world,” he noted. “This situation is not consistent with our goal of having a diversified, sustainable and inclusive economy.”
He said the government would step up efforts to ensure all taxable Nigerians complied with the legal requirements to declare income from all sources and remit taxes due to the appropriate authorities.
Apart from a nine-month window granted non-compliant taxpayers to regularise their tax status, the president said the introduction of the Voluntary Assets and Income Declaration Scheme, VAIDS, would also offer amnesty to those overdue in interest.
In addition, he assured that the VAIDS would help widen the tax net for both the Federal and State governments, as more persons would be encouraged to pay tax through exemptions from investigations or criminal charges.
Details of the N8.612 trillion budget announced by the President included recurrent costs of N3.494 trillion, while capital expenditure of N2.428 trillion, excluding the capital component of Statutory Transfers, and debt service (N2.014 trillion).
Statutory Transfers was about N456 billion, while provision for a sinking fund was about N220 billion (subject to retired maturing bond to local contractors).
The president explained that the five per cent increase over last year’s provision was as a result of increases in transfers to Niger Delta Development Commission, NDDC, and the Universal Basic Education Commission, UBEC, ”relative to the size of oil revenue.”