Government can reduce its dependence on borrowings to finance budget deficits by improving its revenue drive and prioritising expenditure, the Debt Management Office (DMO) says
Patience Oniha, Director-General of the DMO, said this on Tuesday during a presentation at an Executive Course on Budgeting and Fiscal Responsibility organised by the Fiscal Responsibility Commission in Abuja.
Oniha’s paper was titled “Debt Sustainability Challenges and Strategic Revenue Mobilisation Initiative”.
She said that the country had run deficit budgets for many decades, which made borrowings from local and external sources imperative.
“A budget may be surplus, balanced or deficit. Nigeria has run deficit budgets on a consecutive basis for decades.
“The financing of the deficits through borrowing from local and external sources is the principal reason for the growth in debt stock and debt servicing.
“One way to reduce budget deficits is to grow revenues; the other way is to prioritise expenditure and cut waste and leakages,” she said.
She, however, said that the country’s total debt stock was not only that of the Federal Government but also that of the sub-national governments .
She said that, in the midst of low revenue, government was able to deliver on infrastructure development and other responsibilities through borrowings.
According to her, borrowing is not peculiar to Nigeria as countries across world are borrowing.
“Debt levels are rising everywhere. Global revenue dropped as a result of Covid-19, and the Russian-Ukraine conflict has also increased borrowings.
“Our problem is debt service to revenue ratio,” she said.
She added that a larger percentage of the country’s borrowings were concessionary loans from multilateral and bilateral sources.
She said that Nigeria’s debt to GDP ratio was 23 per cent, which is still within the country’s self-imposed limit of 40 per cent.
She said that the figure was also within World Bank/IMF recommend limit of 55 per cent for countries within Nigeria’s peer group and 70 per cent for ECOWAS countries.
