The Director General of the Budget Office, Ben Akabueze has issued a red alert on the state of the country’s debt profile, saying Nigeria now has “limited borrowing space” due to its poor debt-to-revenue ratio and stressed that “trouble” looms for the country if it exceeds its limits.
Akabueze warning is coming on the heel of the request for approval for $800 million World Bank loan by President Muhammadu Buhari to the Senate on Wednesday.
The Director-General of the Budget Office, Akabueze, while addressing members-elect of the 10th National Assembly at their week-long induction ceremony in Abuja on Wednesday, pointed out that while Nigeria remains healthy with its debt-to-GDP ratio, the country is not with its debt-to-revenue ratio.
Akabueze was speaking to the newly elected and returning members of the National Assembly, which is responsible for the consideration, amendment, and passage of the annual budgets of the Federal Government as well as economic bills like the Finance Bill.
“You may have heard that we have one of the lowest gross domestic product-to-debt ratios in the world. While the size of the FG budget for 2023 created some excitement, the aggregate budget of all the governments in the country amounted to about N30 trillion. That is less than 15 percent in terms of ratio to GDP.
“Even on the African continent, the ratio of spending is about 20 percent. South Africa is about 30 percent; Morocco is about 40 percent. And at 15 percent, that is too small for our needs. That is why there is fierce competition for limited resources.
“That can determine how much we can reasonably borrow. We now have very limited borrowing space, not because our debt-to-GDP ratio is high but because our revenue is too small to sustain the size of our debt. That explains our high debt service ratio. Once a country’s debt service ratio exceeds 30 percent, that country is in trouble, and we are pushing towards 100 percent, and that tells you how much trouble we are in.
“We have limited space to borrow. When you take how much you can generate in terms of revenue and what you can reasonably borrow, that establishes the size of the budget. The next thing would be to pay attention to the government’s priorities regarding what projects get what,” Akabueze said.
He also stated that Nigeria should not be classified as an oil-rich economy.
“We are not even an oil-rich economy. To classify oil-rich economies, you talk of countries like Saudi Arabia, where there are 34 million of them and pump 10 million barrels of crude per day, or Kuwait, where there are 3 million of them and pump 3 million barrels per day,” he said.
The Budget Office boss added that while Nigeria has a population of over 200 million, “we are currently pumping about 1.9 million barrels per day.”
He stressed, “So, we are not a rich economy and must resist the temptation that we are an oil-rich economy. Let me make it clear that we are potentially rich countries, but we are not.”
About the same time Akabuaeze was addressing the National Assembly members-elect, the President of the Senate, Ahmad Lawan, read out Buhari’s request to lawmakers on the floor of the Senate.
(firstname.lastname@example.org; Newsroom: +234 8033 964 138)