The Debt Management Office has cautioned the Federal Government to review its borrowing parameters in a bid to lift the country from economic burdens.
The DMO also expressed the readiness to support the measures proffered by the Lagos Chamber of Commerce and Industry to increase government’s revenue to reduce the nation’s debt.
On Thursday, DMO in a statement urged organisations such as LCCI to support the government in its revenue growth drive to reduce the nation’s Debt Service-to-Revenue Ratio.
The statement read that “The attention of the DMO is drawn to a recent report by LCCI, which stated that staying within the current Debt-to-Gross Domestic Product threshold is an unreliable means of calibrating Nigeria’s current debt burden.
“According to the Chamber, the government must review its borrowing parameters on the basis of the country’s Debt-to-Revenue Ratio, which currently calls for concerns.
“The Federal Government of Nigeria is aware of the country’s relatively high Debt Service-to-Revenue Ratio and has published the figures over the years as well as included them in public presentations.
“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 9.0 per cent, generated revenues close to countries such as Kenya, Ghana and Angola with Revenue-to-GDP Ratios of 16.6 percent, 12.5 percent and 20.9 per cent respectively, then, its Debt Service-to-Revenue would be lower.
“This position is buttressed by the fact that the highlighted countries have higher Public Debt-to-GDP Ratios (Kenya: 67.6 per cent, Ghana: 78.9 percent and Angola: 136.5 per cent) compared to Nigeria (22.80 per cent) yet record relatively lower Debt Service to Revenue Ratios due to their higher Revenue-to-GDP Ratios.
“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.
“We agree with the LCCI that measures to increase revenues should be initiated by the public sector. In addition, organisations such as the LCCI are encouraged to support the government in its revenue growth drive, which will subsequently reduce the Debt Service-to-Revenue Ratio.”
