Increased Revenue Is Needed To Service Loans, Others – DMO
The Director-General, Debt Management Office, Mrs Patience Oniha, has said that borrowing is necessary to finance capital projects but the major challenge the country has is the level of revenue it is generating.
She said this while answering questions during a workshop on borrowing guidelines for state governments and the Federal Capital Territory, in Lagos on Thursday.
She said, “The purpose of the Finance Bill is to generate revenue. What is missing is that we have need for borrowing to finance infrastructure, but we need to generate more revenue than we are currently generating as a country. Not only because we want to service debt, but because we want to do other things. But revenue is our challenge.”
According to her, the new borrowing by the country is in the budget, and it is necessary to finance the gap or difference between the revenue and the expenditure.
The expenditure in the budget, she added, included capital projects, and the loan was intended to finance them.
Oniha said a lot of countries still borrowed to access a large amount of capital to finance infrastructure because infrastructure was something that required capital to do, which could not be got from small savings.
“Governments across the globe borrow to fund capital projects; that is why the country borrows,” she said.
She said, “Nigeria needs to generate more revenues. For debt servicing, we have borrowed, we have invested in infrastructure, whether it is in road, rail or airports. But you just need to generate revenue to service the debt, and what is our challenge, Revenue.”
According to her, if advanced countries like Canada, United States, and the United Kingdom have debt to Gross Domestic Product ratio of over 75 per cent, but their debt service to revenue ratio is between eight and 15 per cent, it means their GDP is generating revenue they are using to service the debts.
She said the revenue should be the focus of the government.
Oniha said, “The level of new borrowing is not like it is just going up. If you start from 2016 up to now, you will see that the level of new borrowing has been declining.
“During recession in 2016, the new borrowing was about N2.3tn. If you look at last year, it is about N1.6tn, the other year about N1.7tn. So we are conscious of that but I think we should begin to focus on generating revenues.”
“It is good to borrow but you have to plan how to service it; you have to borrow in a way that is cost efficient, but suitable for government,” she said.
The Chairman of Commissioners of Finance Forum, David Olofu, said it was necessary to borrow because the funds the country had were not enough to achieve the pace of development that the country required.
Olofu, who is also the commissioner, Ministry of Finance and Economic Planning, Benue State, said the workshop between the DMO and the commissioners’ forum, was a platform to enable them to be on the same page with the DMO, so that they could cut down on the time required to process their documents when approaching the market for bonds or commercial activities.