Nigeria said low revenue generation is affecting its capacity to meet its debt servicing obligations and finance day-to-day recurrent expenditure, the country's finance minister Zainab Ahmed has said.
While insisting that Nigeria did not have a debt problem, she claimed that the inability of the country to generate enough revenue to meet its obligations remains a critical sour point.
Africa's top oil producer total public debt rose by 3.32 trillion naira in one year to 25.7 trillion naira as of June end this year.
Nigeria has earmarked about 2.5 trillion naira out of the 10.3 trillion naira budget presented by President Muhammadu Buhari to the parliament last week for 2020.
A senior IMF official Evan Papageorgiou had told a press conference on Wednesday that “While Nigeria has a large exposure to domestic debt, it is important to effectively manage those risks associated with debts incurred in local currency.
“Local currency borrowing could be preferred in some cases but it is not a panacea. The guiding principle is prudent debt management. Local currency flows have been more volatile and Nigeria was not an exception to that. Nigeria has a large exposure to domestic debt, particularly from Central Bank bills.
“And then as we understand the Central Bank bills, there are a lot of higher redemption and more roll-overs going forward. So managing those risks, particularly with respect to local currency debt managing debts and behaviour of non-resident debt is very important,” the IMF chief said.
Nigeria has one of the world's lower revenue to the GDP ratio as it income to economic growth ration stood at 19 percent, its underperformance is significantly straining government’s ability to service its debt obligation.
“Nigeria does not have a debt problem. What we have is a revenue problem. Our revenue to the GDP is still one of the lowest among countries that are comparable to us. It is about 19 percent of the GDP and what the World Bank and the IMF recommend is about 50 percent of GDP for countries that are our size. We are not there yet. What we have is a revenue problem," Zainab said at the conference.
For instance, in expanding the revenue base, Ahmed said VAT increase had been proposed, adding that other streams of revenue such as excise duties on carbonated drinks were being introduced.
“The fact that our revenue is underperforming is not an excuse to bring down our revenue that is required to fund the national budget.
“In 2018, our revenue performed at the level of 58 percent. Half year 2019, our performance moved up slightly to 58 percent. But that is not an excuse to reduce the revenue. Because it means we are all sanctioning underperformance.
“So we have to push the agencies. We have to push ourselves to meet those targets. Those targets are not designed by the Ministry of Finance, Budget and National Planning, the agencies proposed those targets.
“But we sit down with them and interrogate them. For example, the NNPC has a production capacity of 2.5 million barrels per day.
“In 2019, they wanted a target of 2.5 million barrels per day but we insisted to be prudent and scaled it down to 2.3 million. And the performance is 1.98 million effectively including 100,000 per day that is used to settle cash call earnings but the capacity is there.
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