PRESIDENT Muhammadu Buhari said the reason for Nigeria’s rising debts was because his administration spent its way out of two recessions.
Buhari stated this while presenting the 2022 appropriation bill to the joint session of the National Assembly on Thursday.
He noted that the recoveries from the two recessions would not have come as fast as they did without the sustained government expenditure funded by debt
“As you are aware, we have witnessed two economic recessions within the period of this administration. In both cases, we had to spend our way out of recession, which necessitated a resort to growing the public debt,” he said.
Buhari, whose tenure will end in 2023, said he had a short term target to grow Nigeria’s Gross Domestic Product ratio by 15 per cent in 2025.
He said Nigeria did not have a debt sustainability problem but that of generating revenue.
“Our target over the medium term is to grow our Revenue-to-GDP ratio from about 8 percent currently to 15 percent by 2025. At that level of revenues, the Debt-Service-to-Revenue ratio will cease to be worrying,” he said.
“Put simply, we do not have a debt sustainability problem, but a revenue challenge which we are determined to tackle to ensure our debts remain sustainable.
“Very importantly, we have endeavoured to use the loans to finance critical development projects and programmes aimed at improving our economic environment and ensuring effective delivery of public services to our people.”
According to the Debt Management Office, Nigeria’s total public debt currently stands at N35.1 trillion.
Nigeria had recession in 2016 due to oil market lows and poor management of the foreign exchange market. The country saw another recession in 2020 due to COVID-19-induced interruptions globally.
Buhari has borrowed a lot of money in dollars, jeopardising a dollar-strapped economy while ignoring other means of raising revenue.
Director-General of Lagos Chamber of Commerce and Industry (LCCI) Chinyere Almona had said that Nigeria should first identify its array of corporate, physical, intangible, human assets and determine their worth.
“Corporate assets should be securitised via public share issuance to raise equities. A typical example is Saudi Aramco’s IPO of 2019, where $25.6 billion was raised after the oil firm sold a 1.5 per cent stake to private investors, thereby establishing the value of Aramco to be over $2 trillion,” she said, in an emailed statement to The ICIR.
Partner & Chief Economist of PwC Nigeria Andrew S. Nevin had said that Nigeria had $900 billion worth of dead assets in residential, real estate and agriculture land that should be revitalised and converted into liquid assets.
“If we want to get to where we want, we have to turn the dead assets into live assets,” Nevin said at Nairametrics Roundtable monitored by our reporter on August 7.
He explained that Nigeria must begin to drive export growth and diversification through services, noting that two-thirds of the global economy comprised higher-value services than physical goods.