According to KPMG Partner, Ayodele Salami, Nigeria’s debt to revenue ratio is getting alarming.
He warned that with a debt of N22.2 trillion, the nation will be in dire straits servicing the debt in the next five years. He added that debt servicing cost could be higher than income if the situation was not checked. It may spell doom as the country may find it difficult to discharge its responsibilities, such as payment of salaries and fund capital projects, he said.
Salami, who spoke at a roundtable on ‘Nigeria’s Debt Sustainability’ organised by the Lagos Chamber of Commerce & Industry (LCCI) at the weekend, urged the government to do away with assets such as the Kaduna refinery and Ajaokuta Steel Plant, saying these have incured huge debt without any revenue to the government.
Represented by Adegoke Oyelami, also a Partner at KPMG, Salami lamented the use of devaluation to increase revenue, stating that the measure was only deceptive and not sustainable. He called for reduction in the cost of governance and the need to curb inefficiencies and revenue leakages, saying government should aim at working on strengthening the inefficiencies at the ports.
He said the difficulties experienced by importers in clearing goods from the ports, have led to the increase in the cost of goods which, regrettably is passed on to final consumers.
Chief Economist at PwC, Andrew Nevin, said the only way out of the present economic situation is to encourage rapid economic growth. According to him, the country needs an economy that will grow at between six to eight per cent a year. This, he said, would reduce poverty, unemployment, underemployment of young Nigerians with the population growing at about three per cent.
He said with a rapidly growing population, the nation may not have the capacity to address her debts any moment from now.
He said: “Nigeria’s poverty level is on the increase because the nation’s growth is not in alignment with its revenue. The economy declined significantly between 2015, and 2018, and may likely decline in 2019 with the International Monetary Fund’s (IMF’s) prediction that the economy would decline in 2020, 2021 and 2022.
“Eight years of declining of GDP per person (per capital income) in simple terms means we are getting poorer and poorer every year, so it is not a big surprise that we cannot raise more tax revenues. The only way out is to get our growth rate up and that means encouraging policies that promote growth. Elimination of fuel subsidy is a good place to start, ease of doing business still not good enough.”
Also speaking, the Managing Director/CEO, Financial Derivates and Company Limited, Bismarck Rewane, regretted that the government borrows to spend rather than borrowing to invest. He said the nation’s debt is growing steadily while productivity remains low,a condition that leads to further pauperising the citizenry and leading to greater poverty.
He canvassed policy consistency and the need to build confidence on the economy to attract investors.
He said: “We can’t be penalising people who are investing in our country, there must be sanctity of contracts. We must embrace conducive environment, collaborate with investors and create an ambience that encourages investment, saying mangers of the economy must build trust in the people and the investing public.