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Why Nigeria will continue to borrow ~DMO

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By Samuel Bankole

The Debt Management Office (DMO) has attributed the reason for the country’s high debt stock to the inability of the government to generate enough revenue and its dependence on crude oil sales for its income.

The debt office in a statement on Thursday said the country needs to generate more revenue to be able to lower its debt service to revenue ratio going forward.

“The primary reason for the high Debt Service-to-Revenue Ratio is because Nigeria’s revenue base is low. Furthermore, the Government is largely dependent on the sale of crude oil, as a major revenue source.

“If Nigeria, with a Revenue-to-GDP Ratio of 9 per cent, generated revenues close to countries such as Kenya, Ghana and Angola with Revenue-to-GDP Ratios of 16.6 per cent, 12.5 per cent and 20.9 per cent respectively, then, its Debt Service-to-Revenue would be lower,” the DMO wrote in a statement in response to a report of Lagos Chamber on the country’s debt stock.

The debt office said countries such as Kenya, Ghana and Angola have higher debt to GDP ratios than Nigeria and consequently a lower debt service to revenue ratios “to their higher Revenue-to-GDP Ratios.”

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The debt office said while Nigeria’s debt to GDP ratio stands at 22.80 per cent, that of Kenya was higher at 67.6 per cent, Ghana 78.9 per cent and Angola stands at 136.5 per cent.

It said those countries with higher debt to GDP ratios “record relatively lower Debt Service to Revenue Ratios due to their higher Revenue-to-GDP Ratios.”

The country’s debt management office blamed Nigeria’s reason for borrowing on the need to build infrastructure, create jobs for its huge population and ensure economic growth.

“Infrastructure development, job creation and economic growth, in the face of relatively low revenues, require the Government to borrow, at least in the short term.

“Due to the low revenue base, the FGN is already implementing measures to increase and diversify revenues and subsequently, lower Debt Service-to-Revenue Ratio. Among these initiatives are the Strategic Revenue Growth Initiative (SRGI) and the annual Finance Acts.

“To reduce the level of direct borrowing, the Government also actively engages the private sector to participate in infrastructure development through various initiatives such as the Infrastructure for Tax Credit Scheme, the establishment of the Infrastructure Corporation of Nigeria Limited and other Public-Private Partnership arrangements that are guaranteed by the Government,” the debt office said.

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