Minister of Finance Zainab Ahmed has said Nigeria’s borrowing is still low compared to Ghana, Brazil, South Africa, Egypt and Angola.
This is just as she said at 19 per cent of Gross Domestic Product (GDP) the country’s debt was still at manageable level. The minister said this at the just concluded Spring Meetings in Washington DC, United States of America, USA.
She said: “At 19 per cent to GDP our borrowing is still low. What is allowed by our Fiscal Responsibility Act is the maximum of 25 per cent of our GDP compared to other countries like; Ghana, Egypt, South Africa, Angola and Brazil and we are the lowest in terms of borrowing.”
The International Monetary Fund and the World Bank have at various forums warned about Nigeria’s rising debt.
The two world financial institutions said the country’s rising debt was unsustainable as Nigeria continues to spend a large chunk of its annual budget on debt servicing with low revenue base.
Early this month, theDebt Management Office (DMO) said Nigeria’s total debt as at December 31, 2018 stood at N24.39 trillion ($79.437 billion) which represents a year-on-year growth of 12.25 per cent.
Revenue drive as a challenge
However, the minister acknowledged and pointed at the challenge of revenue generation by the country. “What we have is revenue problem and when revenues perform the aggregate rate of 55 per cent, it hinders the ability to operate in our budget.
“So it hinders our ability to service all categories of expenditures, including salaries, allowances, capitals as well as debts.”
She said the ministry would continue to seek new ways of boosting the nation’s revenue.
“So what we are doing at the Ministry of Finance is concentrating and enhancing of our revenue and collection capacities,” she stated.
Subsidy removal/IMF’s position
On subsidy, she reiterated that the federal government has no intention of removing fuel subsidy.
At the Spring Meeting, the IMF had called on the federal government to remove subsidy on fuel, saying it was the right thing to do.
Addressing a press conference, IMF boss, Christine Lagarde said with the low revenue mobilisation that existed in Nigeria in terms of tax to Gross Domestic Product, it was important for the country to remove fuel subsidy.
She said this would enable Nigeria channel such funds into other critical areas of the economy.
“We are not there yet and we discuss this periodically under the Economic Management Team, but we have not found a formula that works for Nigeria and you know Nigeria is unique because what works in Ghana may not work in here. So it is still work in progress and so there is no intention to remove fuel subsidy at this time,” the minister said.
Drawing a comparison with previous regimes where subsidy was paid to marketers, the minister said this time around, “NNPC is the sole importer of petroleum products, and so what they import is the cost of business and they deduct that cost before they remit the little money to the federation account. So that is completely different.
“It is more cost effective, it is cheaper and what is being done now is easier to monitor what transpired.”