The president of the African Development Bank, Akinwunmi Adesina, has expressed worry over Nigeria’s source of revenue for debt servicing.
He said Nigeria’s debt service to revenue ratio is relatively high at 73 per cent and is being worsened by the country’s reliance on the oil sector proceeds for its export revenue.
As of September, the Debt Management Office (DMO) recorded the country’s total public debt at N35.46 trillion at the end of the second quarter of 2021.
According to the 2022 budget proposal of N16.39 trillion, N3.61 trillion has been earmarked to service debt for the year, representing 22 per cent of the total expenditure and 35.6 per cent of the total revenue.
Speaking at the Mid-Term Ministerial Performance Review retreat, in Abuja, Mr. Adesina said Nigeria’s debt-to-GDP ratio is considerably moderate at 35 percent.
“Nigeria must decisively tackle its debt challenges. The issue is not about the debt-to-GDP ratio, as Nigeria’s debt-to-GDP ratio at 35 per cent is actually still moderate. The big issue is how to service the debt and what that means for resources for domestic investments needed to spur faster economic growth.
“The debt service to revenue ratio for Nigeria is high at 73 per cent. Things will improve as oil prices recover, but the situation has revealed the vulnerability of Nigeria’s economy. To have an economic resurgence, we need to fix the structure of the economy and address some basic fundamentals.
“Nigeria’s challenge is revenue concentration, as the oil sector accounts for roughly 75 percent of export revenue while according to the statistics of the Central bank 50 percent of all government revenue.
“What is needed for sustained growth and economic resurgence is to remove the structural bottlenecks that limit the productivity and the revenue earning potential of the huge non-oil sectors.”
He advised that Nigeria significantly boost productivity and revenues from its non-oil sector with appropriate and synergistic fiscal and macroeconomic policies especially flexible market base exchange rate that will enhance international competitiveness.
He also stressed the need for infrastructure as critical to unlocking the full potentials of the Nigerian economy.
“Nigeria will need $25 billion a year for investment in infrastructure. Financial innovations should be prioritized as the government alone can not afford this huge financial cost. The private sector should be given more incentives to invest in infrastructure,” he said.
He commended the federal government’s N15 trillion infrastructure funds, the initiative for tax credit for private sector investment in infrastructure.
He said Public-Private Partnership, pension funds, and others should be accelerated to invest in major infrastructure all across Nigeria.
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