ABUJA (Sundiata Post) – Director-General of the Debt Management Office (DMO), Dr. Abraham Nwankwo, on Thursday defended Nigeria’s rising debt, claiming that it would not affect the nation’s economy negatively.
Nwankwo, who put Nigeria’s current debt at $64 billion, also maintained that the sum of N1.2 trillion domestic borrowing and foreign loan of N635.88 billion proposed in the Medium Term Expenditure Framework (MTEF) for the 2016 fiscal year are not injurious to the nation’s development.
Speaking when he appeared before the Senate Committee on Foreign and Local Debts, Nwankwo further disclosed that 84 percent of Nigeria’s entire debt profile is owed locally, while the remaining 16 percent is foreign loan.
He claimed that the nation needed $25 billion per annum continuously for the next 10 years in order to effectively tackle its infrastructure deficit.
Nwankwo explained that debts owed to local contractors are not part of the domestic debts quoted because their details are under the purview of the Budget Office of the federation and National Planning because they are operational debts.
He said that local contractors’ debts arose from the activities of agencies in terms of implementation of capital expenditures.
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“Ordinarily, if the implementation of the budget is followed in detail, there is no reason why there should be local contractors debt because it is already in the budget. We have been sensitising Nigerians that we need to do better because our tax GDP (gross domestic product) ratio is very low compared to countries in our debt role.
“Their entire GDP ratio is about 18 percent, whereas for Nigeria, it is about six percent, which means that we are not being effective in collecting taxes to reflect the size of our economy. This has implications for debt service.
“Certainly, there is need to be careful, even though there is space we need to relate debt service to revenue. The solution is that we have a big gap to fill because when we move upward from the six percent tax GDP ratio, we will have a lot of money to solve our problems including servicing our debts.
“For now, our debt servicing GDP ratio is still very low. But we are optimistic because there is room to collect tax from the existing level of economic activities,” he said.
On the proposed borrowing in the MTEF for the 2016 fiscal year, the DMO boss said government projection was in the right direction.
“Even before the collapse of the oil prices, it has been estimated, more than five years ago that Nigeria needed a minimum of $25 billion per annum continuously for up to 10 years to enable it to close its infrastructure deficit. That has been established by all relevant experts and institutions.
Nwankwo, who put Nigeria’s current debt at $64 billion, also maintained that the sum of N1.2 trillion domestic borrowing and foreign loan of N635.88 billion proposed in the Medium Term Expenditure Framework (MTEF) for the 2016 fiscal year are not injurious to the nation’s development.
Speaking when he appeared before the Senate Committee on Foreign and Local Debts, Nwankwo further disclosed that 84 percent of Nigeria’s entire debt profile is owed locally, while the remaining 16 percent is foreign loan.
He claimed that the nation needed $25 billion per annum continuously for the next 10 years in order to effectively tackle its infrastructure deficit.
Nwankwo explained that debts owed to local contractors are not part of the domestic debts quoted because their details are under the purview of the Budget Office of the federation and National Planning because they are operational debts.
He said that local contractors’ debts arose from the activities of agencies in terms of implementation of capital expenditures.
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“Ordinarily, if the implementation of the budget is followed in detail, there is no reason why there should be local contractors debt because it is already in the budget. We have been sensitising Nigerians that we need to do better because our tax GDP (gross domestic product) ratio is very low compared to countries in our debt role.
“Their entire GDP ratio is about 18 percent, whereas for Nigeria, it is about six percent, which means that we are not being effective in collecting taxes to reflect the size of our economy. This has implications for debt service.
“Certainly, there is need to be careful, even though there is space we need to relate debt service to revenue. The solution is that we have a big gap to fill because when we move upward from the six percent tax GDP ratio, we will have a lot of money to solve our problems including servicing our debts.
“For now, our debt servicing GDP ratio is still very low. But we are optimistic because there is room to collect tax from the existing level of economic activities,” he said.
On the proposed borrowing in the MTEF for the 2016 fiscal year, the DMO boss said government projection was in the right direction.
“Even before the collapse of the oil prices, it has been estimated, more than five years ago that Nigeria needed a minimum of $25 billion per annum continuously for up to 10 years to enable it to close its infrastructure deficit. That has been established by all relevant experts and institutions.
“Borrowing is being done to achieve positive impact on the economy. It will lead to growth, creation of employment, and build solid capacity for the future, which will help us to diversify our economy.
“What the government is planning to do now is to explore at least five out of the 34 solid minerals that we have. We will develop and process them for export.
“From the Debt Management Office perspective, the MTEF/FSP as presented to the National Assembly, is perfect for the times and a good recipe for dealing with the challenges of the collapse of the oil prices and the need to rapidly develop and diversify the economy, build infrastructure,” he said.
He added that the proposed borrowing and exploration of other sources of revenue would act as a strong base for growth in agriculture, solid minerals, petrochemical and others.
He said oil and gas were still useful in the sense that the nation could re-process them to manufacture other products like fertilizers and plastics, among others that would have more positive impact on the economy than exporting crude.
He said for a country to achieve a sustainable development, it should not rely only on a single source.
“Aside revenue generated, there are openings in local and international borrowing. If we must borrow, we must have options. Whatever we do also takes into account the federal nature of the government. That is the reason each state has its own department of debt management,” he added.
He said most of the loans taken by Nigerians are 40 years but that a good thing was that they were spaced.
Chairman of the Committee, Senator Shehu Sani, who commended the Federal Government’s initiative aimed at finding alternative revenue to oil, however, canvassed for stiffer punishments for any individual or agency of government that misapplied foreign or local loans meant to improve the living standards of Nigerians.
“What the government is planning to do now is to explore at least five out of the 34 solid minerals that we have. We will develop and process them for export.
“From the Debt Management Office perspective, the MTEF/FSP as presented to the National Assembly, is perfect for the times and a good recipe for dealing with the challenges of the collapse of the oil prices and the need to rapidly develop and diversify the economy, build infrastructure,” he said.
He added that the proposed borrowing and exploration of other sources of revenue would act as a strong base for growth in agriculture, solid minerals, petrochemical and others.
He said oil and gas were still useful in the sense that the nation could re-process them to manufacture other products like fertilizers and plastics, among others that would have more positive impact on the economy than exporting crude.
He said for a country to achieve a sustainable development, it should not rely only on a single source.
“Aside revenue generated, there are openings in local and international borrowing. If we must borrow, we must have options. Whatever we do also takes into account the federal nature of the government. That is the reason each state has its own department of debt management,” he added.
He said most of the loans taken by Nigerians are 40 years but that a good thing was that they were spaced.
Chairman of the Committee, Senator Shehu Sani, who commended the Federal Government’s initiative aimed at finding alternative revenue to oil, however, canvassed for stiffer punishments for any individual or agency of government that misapplied foreign or local loans meant to improve the living standards of Nigerians.