The World Bank has warned that it may take Nigeria 300 years to bridge its infrastructure gap if it continues with the current rate of expenditure allocations, hence the need to start spending more efficiently.
This was disclosed at the launch of the World Bank’s Nigeria Public Finance Review (PFR) fiscal adjustment for better and sustainable release held in Abuja on Monday.
This raises concerns as the bank said Nigeria lags behind its peers in public investment spending, resulting in poor infrastructure quality in the country.
In his presentation, Alex Sienaert, chief economist, World Bank, said Nigeria currently has the lowest government expenditure globally while it battles low revenue which is a key risk to fiscal and debt sustainability, noting that public spending has decreased and become more rigid overtime.
“Nigeria spends a large share of its limited resources on untargeted and inefficient subsidies while social sectors like education and health suffer,” he said
He projected that Nigeria may spend as high as N4.8 trillion servicing fuel subsidy in 2022 which can increase to N5 trillion in 2023.
“The poorest 40 percent of the population purchase just 3 percent of all subsidised petrol; Nigeria’s low petrol prices create incentives for smuggling to neighbouring countries and benefits mainly the rich,” he explained.
The chief economist recommended that Nigeria must spend more efficiently, increase its revenue and strengthen its institutions if it will ply the path of sustainable fiscal goals with improved service delivery.
“Borrowing more is not the solution; debt servicing has surged over the past decade and is expected to continue increasing over the medium term crowding out productive spending,” he said.
He also said fiscal deficits were consistently higher than budgeted due to over optimistic revenue projections hence budgeting better will help to generate significant fiscal savings.
Patience Oniha, the director-general, Debt Management Office (DMO), said it was not advisable for Nigeria to continue borrowing, especially as its debt stock has grown faster over the last few years.
“Continuous borrowing is not the solution. We are supposed to be diversifying the sources of revenue and raising revenue to service debt,” she said
She acknowledged that some of Nigeria’s peers in Sub Saharan Africa have much higher debt to GDP ratio but they have much more tax revenue to GDP.
“As debt stock is growing so is debt service; 60 percent of the external debt stock is concessional but it will be good to have 100 percent external concessional loans
Ben Akabueze, the director-general, Budget Office, advised that in its drive to grow revenue, the government should tax the rich and have them pay taxes on luxurious goods as well as their properties.
“If the rich can buy a private jet for themselves, they should pay 100 percent tax on it, we cannot escape the reality of an upward adjustment of our tax rates like VAT and excise duty. We need to change some tax laws and tighten controls on remittances to avoid leakages, “he said.
Speaking on oil rNigeria’s infrastructure gapevenue, the DG said although Nigeria may not be in the position to determine oil prices but it can improve its volume by curbing oil theft
Doyin Salami, chief economic adviser to the president, said discussions around subsidy removal should tilt more towards gradual or immediate removal, especially when current unfavourable macroeconomic conditions are considered.
He also said that the industry’s contribution to the economy has declined significantly; adding that if it continues, jobs cannot be created which will limit the efficacy of income tax.
“If you do not want to pay taxes, you will pay higher interest rates as the country continues to borrow. Much more must be done; Nigeria has to build an agro industrial complex that can create jobs,” he said.
He added that if Nigeria would take advantage of the African Continental Free Trade Area (AfCFTA), it needs to develop its agro-industrial sector.
Shubham Chaudhuri, World Bank’s Country director for Nigeria, in his remarks, said the country has a huge development financing need which has not been met hence the government needs to grow its revenue and efficiently utilise its fiscal resources.