Experts have slammed the Federal Government following its projection that debt servicing will cost N10.43tn by 2025.
According to the 2023-2035 Medium Term Expenditure Framework & Fiscal Strategy Paper, the projection represents a 182.66 per cent increase from the N3.69tn budgeted for debt service in 2022.
The PUNCH reported that multilateral agencies and economists have constantly warned the Federal Government about the rising cost of debt service, which can trigger a crisis for the country.
However, the Minister of Finance, Budget and National Planning, Dr Zainab Ahmed, and the Director General of the Debt Management Office, Patience Oniha, have insisted that the country does not have a debt problem but a revenue challenge.
In a document by the DMO DG recently obtained by our correspondent, the DMO stated that high debt levels would often lead to high debt services and affect investments in infrastructure.
However, the Chief Executive Officer of Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, said that the Nigerian economy had been characterised by diverse economic vulnerabilities, which included rising public debt and debt service burden.
He said, “Debt service to revenue ratio for the first four months of the current year is over 100 per cent. The implication of this is that the actual revenue of the government over the period is not sufficient to service debt. Therefore, financing of the operations of government – personnel cost, overhead cost, capital expenditure, and even part of the servicing of the debt – will have to come from additional borrowing. These portend severe vulnerabilities for the Nigerian economy.”
A Professor of Development Macroeconomics at the University of Lagos, Prof Olufemi Saibu, criticised the government for over-borrowing.
He said, “I think we are over-borrowing. We continue to rely on international benchmarks, which make us lazy in terms of revenue generation.”
Prof Saibu urged the government to lessen its huge expenditure costs and channel money into more productive sectors of the economy.
“With our current heavy infrastructure debt financing and the low productivity in the local economy, the government needs to find a way of reducing its expenditures. We need to redirect the government’s finances to areas that are productive and borrow less for consumption,” he said.
In addition, Prof Saibu said that the government needed to look inwardly and borrow domestically rather than externally, which would lessen the burden of debt service.
He said the government should stop saying the country had the capacity to borrow more, and refrain from ballooning already outsized debts.
Prof Saibu advised that the government should engage the private sector in the area of infrastructure development to reduce the weight on the public sector.
A Professor of Development Economics at Babcock University, Prof Adegbemi Onakoya, said that borrowing was not an issue but the value obtained from it.
He also said that Nigeria had a revenue problem, which had made the country rely more on debt financing.
Prof Onakoya also said that there was a problem when money borrowed was not judiciously applied for productive purposes or programmes that would help production.