The Debt Management Office (DMO), has stressed the need for Nigeria to implement an efficient tax administration to tackle its revenue challenges.
The Director-General, DMO, Ms Patience Oniha, said this at a media forum for journalists, themed: “Nigeria’s Public Debt and the Capital Market,” at the weekend in Lagos.
She said the country needs to operate an efficient tax administration based on greater compliance to remittances devoid of all forms of evasions.
Oniha said revenue challenge remains one of the most critical policy issues of the Federal Government that is currently threatening its debt sustainability.
This is also compounded by leakages such as an increase in oil theft and petrol subsidy, which have significantly reduced the revenue from oil sales that used to account for the bulk of government revenue.
She noted that the outlooks of both local and international markets are becoming tighter with rising interest rates, adding that Nigeria needs 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.
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 reiterated that the nation’s total public debt to Gross Domestic Product (GDP) of 23.06% as of June 2022, was still within Nigeria’s self-imposed limit of 40%, against the World Bank/International Monetary Fund (IMF) recommended limit of 55% for countries within Nigeria’s peer group and 70% for ECOWAS countries.
She, however, admitted that debt service-to-revenue is extremely high, an indication that urgent steps need to be taken to boost Nigeria’s revenue and enhance public debt sustainability.
Oniha said: “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.”
She noted that 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 from taxation as a source of revenue generation, Oniha insisted 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 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.
