FG anchors increased borrowing on poor revenue, recession

The nations borrowing has been increasing in recent times because of dwindling revenues as well as the recent recession that the country slumped into, the Federal Government has said. This explanation was contained in a document entitled: Nigerias Public Debt  Some Recurring Issues, put together by the Debt Management Office, which was obtained by our correspondent in Abuja on Wednesday.

In the document, the DMO also explained that before going for commercial loans (which have higher interest rates), the government usually explored cheaper bilateral and multilateral sources such as the World Bank. According to the DMO, Nigerias income has been low compared to other economies in sub-Saharan Africa, thus making borrowing inevitable.

The DMO said, The fact is that Nigeria is generating revenue commensurate to the size of its economy, which is confirmed by the tax revenue to GDP ratio of only six per cent. Nigerias tax revenue to GDP ratio at six per cent ranks among the lowest in the world. According to the World Banks April 2017 publication on Regional Economic Outlook, Sub-Saharan African Fiscal Adjustment and Economic Diversification, the sub-Saharan average tax revenue to GDP was 17 per cent; emerging economies 26 per cent; and advanced economies, 36 per cent. This speaks to the need to diversify the economy and generate more revenues from non-oil sources, which should reduce budget deficits and the level of new borrowing. It added that while spending to stimulate the economy, the present administration had channeled borrowing to capital projects (power, roads, and rails) in order to create jobs and provide enabling environment that would support private sector investment in various activities such as agriculture and manufacturing.

(Punch)