BY FESTUS OKOROMADU, ABUJA
The Debt Management Office has described the two policies of fuel subsidy removal and unification of the foreign exchange rate by President Bola Tinubu as critical for the revival of the country’s economy.
Director General of DMO, Ms. Patience Oniha, stated this while speaking at a one-day Technical Roundtable on Economic Blueprint for President Tinubu’s administration organized by ActionAid Nigeria.
Commending the president for his courage to take the decision, she said the twin policy of subsidy removal and forex unification have enormous benefits for the economy.
She said though the implementation of these policies has come with some pains, the benefits will have a more lasting effect on the economy.
“It is essential to recognize that the situation of the economy needed critical and urgent attention to avoid deterioration in major economic and social indices. Thus, some of the measures that have been taken so far were not only needed but essential to propel Nigeria towards sustainable development,” the DMO boss said.
She charged the government to aim for a development model that increases employment opportunities and higher income levels.
Addressing criticism about the timing of the government policies as some persons argued that it has brought pains on the masses, Oniha said, “it is important for us to understand the impact of subsidies and exchange rates on the budget.
“Subsidies are an expenditure item in the budget, thus invariably; they contribute to the budget deficits. On the other hand, the Naira exchange rates used for the budgets are the official rates, which we all know are much lower than the open market rates, the effect of which is lower revenue.
“Overall, these two policy stances that were maintained over many years, contributed to persistent budget deficits which were financed by an average of 90 percent through borrowings.
“For instance, the size of the 2023 Appropriation Act (Budget), is about N21 trillion with a deficit of N11 trillion to be financed by new borrowing of over N9 trillion,” she noted.
She pointed out that the reversal of these policies has resulted in much higher revenues for all tiers of government.
“As the debt stock continued to grow due primarily to persistent budget deficits, it unavoidably resulted in an increase in debt service obligations,” she said, adding, “Currently, debt service consumes a significant portion of our revenues, not necessarily because debt stock is high but because revenue is low and worse still, underperforms the targets in the budgets.”
She said though Nigeria’s debt stock to GDP ratio at below 25 percent is among the lowest globally, her debt service to revenue ratio, which in 2022 reached 100 percent, is relatively high and reduces the fiscal space available to the government.
“This indicates that the issue lies with our revenue. Unfortunately, the focus on revenue improvement previously did not change the outcomes significantly,” she said.
Oniha described the policies as steps in the right direction to bring revenue to the fore by the present administration.
“My main message here is that we cannot discuss growth, development, or debt without giving due consideration to revenue. It is now imperative that we confront revenues and take decisive actions to further strengthen our revenue streams from all sources. We expect to see improvements in revenues from the work of the Committee on Revenues set up by the President,” she said.