The International Monetary Fund (IMF) on Wednesday raised concerns over the risk of rollovers of Nigerian debt and meeting the needs for refinancing, but the Federal Government is insisting that the debt levels are sustainable.
Rollover risk is commonly faced by countries and companies when a loan or other debt obligation (like a bond) is about to mature and needs to be converted, or rolled over, into new debt.
Tobias Adrian, financial counsellor and director of the monetary and capital markets department, IMF, who unveiled the Global Financial Stability Report (GFSR) titled ‘Vulnerabilities in a Maturing Credit Cycle’ at the ongoing World Bank/IMF Spring meetings in Washington DC, admitted that Nigeria has been borrowing in the international market with rising rollover risk.
“But we worry – so on the one hand, that is very good because it allows Nigeria to invest more, but on the other hand, we do worry about rollover risks going forward,” Adrian said.
He said at the moment, funding conditions in economies such as Nigeria and other sub-Saharan African countries are very favourable but that might change at some point.
“There is a risk of whether these needs for refinancing can be met in the future,” Adrian said.
The total public debt of Africa’s biggest oil producer stood at N24.387 trillion or $79.437 billion as at December 31, 2018, representing a year-on-year growth of 12.25 percent, data from the Debt Management Office (DMO) shows.
The Federal Government on Wednesday, however, dismissed fears about the debt profile, saying “it is sustainable”.
Minister of Budget and National Planning, Udoma Udo Udoma, in apparent reaction to increasing criticisms of government borrowing programme, however, admitted that Nigeria has a revenue challenge which it is addressing.
Udoma stated this while briefing State House correspondents after the weekly Federal Executive Council meeting presided over by Vice President Yemi Osinbajo.
“With regard to our debts, they are sustainable. We do have a revenue challenge and we are focusing on that. Once the revenues come up, it will be obvious that we don’t have a debt problem at all,” Udoma said.
“We are working on a number of initiatives to increase our revenues. We are looking at initiatives to widening the tax base,” he said.
Udoma also said that government is looking at initiatives to increase efficiency in collections, using a single window, which will help to increase efficiency in custom collections. These efforts are geared towards boosting Nigeria’s non-oil revenue and relieving an over-dependence on petrodollars.
The IMF said Nigeria has one of the lowest ratios of non-oil revenue-to-GDP at around 3.4 percent in the world.
“One of our main recommendations for Nigeria is the need for a comprehensive tax reform that would sustainably increase non-oil revenue,” the IMF financial counsellor/director said.
Responding to questions after presenting the Fiscal Monitor report to the media, Adrian said total tax revenue to GDP at around 8 percent is also very low compared to peers. The report ranked Nigeria and Qatar the lowest in the use of sovereign wealth fund.
“As you know, the needs for infrastructure and for spending on human capital are very large,” he said.
Adrian emphasised on improving exercise taxes to shore up the country’s revenue.
“I think there have been some steps in that direction, but there is a scope for expanding the coverage of excises to other goods and also higher rates on excises,” he said.
Another important area, he said, is aggressive streamlining of tax incentives and exemptions.
The IMF said large financial institutions and governmental agencies around the world including central banks and even the IMF are under constant cyber threats.
“So in general, we do expect more cyber-attacks. The question is, are authorities taking the right steps to prevent any adverse developments after these attacks?” Adrian asked.
He said the Fund has started to provide technical assistance on that particular purpose.
“And we are helping our membership to develop a policy framework around cyber-attacks,” he added.
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