Mounting debt profile: ‘Nigeria safe to borrow additional N7.9trn’

Analysts at FSDH Research have said Nigeria still has room to borrow an additional N7.89 trillion before reaching a threshold of about N32 trillion.

Recall that the Debt Management Office (DMO) during the week announced that Nigeria’s debt stood at N24.4 trillion as at December 31, 2018.

The release of the report stirred a hot debate in the country, with different stakeholders appealing to federal government to reduce its borrowings. The International Monetary Fund (IMF) also cautioned the country against embarking on further borrowings.

However, in its report released this weekthe Lagos-based investment company said based on the fact that the public debt-to-GDP ratio of Nigeria, Africa’s largest economy, was still under 20 percent, precisely 18.89 percent, it can still get more loans to reach the 25 percent benchmark set for itself and the 56 percent international threshold set for countries in Nigeria’s peer group.

FSDH Research argued that countries like China, South Africa, India, UK and USA all have high debt-to-Gross Domestic Product (GDP) of over 50 percent, but stressed that they have successfully managed to deploy their borrowings into activities that can stimulate revenue generation including education, transportation, construction, security, technology, and other growth-enhancing infrastructure.

“By utilizing these borrowed funds in areas that improve the ease of doing business in their countries, they have been able to grow their economies further, create job opportunities, and create more avenues for their governments to grow their revenue,” the report said.

It advised the Nigerian government to diversify its revenue and create multiple sources so as to change the present narrative.

“Just as FSDH Research has suggested several times in our previous reports, there is an urgent need to expand the revenue base of the country through the growth of the non-oil sector.

“We suggest that the government should adopt strategies to increase and broaden its revenue. Some of these strategies include an increase in the tax base of the country (apart from an increase in the tax rate), removal of all administrative delays in obtaining licences and approvals (including titles to landed properties for building and agricultural purposes), the sale of unprofitable government assets and, removal of subsidies on electricity and Premium Motor Spirit (PMS).

“In addition, we emphasize that borrowing should be tied to specific projects that can improve the competitiveness of the country, such as the FGN Sukuk Bond.

“To conclude, as individuals and business entities in Nigeria, we can help government generate more revenue by paying our taxes and other dues as and when due. And government must surely reciprocate with the provision of appropriate facilities that will make life better for all,” it said.

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