Patience Oniha, Director General, Debt Management Office (DMO) has noted the need for Nigeria to operate an efficient tax administration to tackle revenue challenges.
She said this at the 2022 Capital Market Correspondents Association of Nigeria (CAMCAN) with the theme: “Nigeria’s Public Debt and the Capital Market over the weekend in Lagos. Oniha noted the country needs to operate an efficient tax administration that would ensure greater compliance to remittances devoid of all forms of evasions in the system.
She further said that revenue challenge remains one of the most critical policy issues of the Federal Government which is currently threatening nation’s debt sustainability.
The current revenue problem is compounded by leakages such as an increase in oil theft and petrol subsidy, both of which has significantly reduced the revenue from oil sales that used to account for the bulk of government revenue. Oniha noted that the outlook of both the local and international markets are becoming tighter with rising interest rate.
She, therefore, stressed the need for the country to urgently moderate its new borrowings and ensure that public debt is sustainable through accelerating its revenue base to shore up non-oil revenue and rationalising expenditure.
Oniha said that the nation’s total public debt to Gross Domestic Product (GDP) of 23.06 percent as of June 2022, was still within Nigeria’s self-imposed limit of 40 percent, the World Bank/International Monetary Fund (IMF) recommended limit of 55 percent for countries within Nigeria’s peer group and 70 percent for ECOWAS countries.
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She, however, argued that debt service to revenue was extremely high, an indication that urgent steps needed to be taken to boost nation’s revenue and enhance public debt sustainability.
“Nigeria’s public debt stock has grown consistently over the past decades and even faster in recent years. Consequently, debt service has continued to grow.
“Nigeria’s low revenue base compounded by dependence on crude oil resulted in budget deficits over the past decades. Efforts at increasing non-oil revenue are yielding positive results.
“Dependence on borrowing and low revenue base are now threatening debt sustainability. With a low debt to GDP ratio, Nigeria’s debt service to revenue ratio would have been low if revenue was strong,” Oniha said.
According to her, most countries around the world have placed more emphasis on taxation as a principal source of funding for the government while reverse is the case in Nigeria.
Aside taxation as a source of revenue generation, Oniha stated that borrowings must be tied to projects that would generate commensurate revenues to service loans used to finance the projects.
She also said that physical assets such as idle or under-utilised properties could be redeveloped for commercialisation to generate revenue.
Speaking on initiatives and activities for debt sustainability, Oniha said that Nigeria deploys debt management tools of the World Bank and IMF that enable debt sustainability.
She noted these tools include an annual Debt Sustainability Analysis (DSA) and a Medium-Term Debt Management Strategy (MTDS) every four years.
