The Minister of Finance, Mrs. Kemi Adeosun has said that Nigeria must not borrow more to fund its budget and should instead raise money internally to fund the budget.
This is just as Acting President Yemi Osinbajo also solicited the co-operation of the private sector in the federal government’s quest for a better country, assuring it that the government has the will to turn the country around within 18 months.
The remark by the minister was a pointer that the country might shelve its planned $2 billion loans from the World Bank, Reuters reported.
Africa’s largest economy is in its first recession in 25 years, and had planned to borrow extensively from overseas to fund a record budget aimed at helping the country spend its way out of its economic doldrums.
But plans for lenders like the World Bank and African Development Bank (AfDB) to loan at least $2 billion to Nigeria have been stalled for over a year, as international organisations’ frustrations mounted at the country’s refusal to impose key fiscal reforms such as allowing its foreign exchange rate to float freely.
Adeosun, who made the comments while speaking at the quarterly business forum held at the Banquet Hall of the Presidential Villa in Abuja, suggested that Nigeria will no longer seek such loans, or an additional $1.5 billion it had planned to raise from international debt markets.
“We cannot borrow anymore, we just have to generate funds domestically to fund our budget. Mobilise revenue to fund the necessary budget increase,” she said.
In May, the Director General of the Budget Office of the Federation, Mr. Ben Akabueze, had said the country has a shortfall of $7.5 billion for its 2017 budget expenditure, adding that this would be addressed with $3.5 billion from the aforementioned loans and debt.
The government also planned to raise $4 billion from the local debt market, he said at the time.
But Adeosun said the government’s medium-term plan was based strongly on increasing revenue mobilisation.
She stressed that increasing the country’s revenue was not something that could be attained instantly.
“For example, in some cases like tax collection we needed data, we needed to sign some treaties and we needed tax policy reforms. We have been working hard on these measures.
“Our focus on revenue is total. Revenue generation is not as rapid as raising debt but it is permanent. Increased revenue will ensure sustainability, will prevent us from falling into a debt trap and will reduce our debt service to revenue ratio,” the minister added.
Adeosun also expressed concern over the government’s inability to deliver essential services due to financial constraints, which she blamed on the nation’s small annual budget.
Putting the nation’s annual budget as a percentage of gross domestic product (GDP) at six per cent, she said this was significantly low, adding that it was the lowest in sub-Saharan Africa.
According to her, the situation was so precarious that salary payments take the largest chunk of the annual budget, explaining that the development was largely caused by non-payment of taxes by the Nigerian public.
She said the by-product of tax evasion was the incapacity of the federal government to deliver basic projects aimed at improving the living standards of the people, even as she emphasised the drive of the government to generate more revenue to alter the status quo.
“Our budget is significantly lower relative to GDP. We are currently at six per cent. It is lower than all our peers. We are currently at six per cent and that is the lowest in sub-Saharan Africa and one of the lowest in the world.
“Our budget size is too small and that means we can only pay salaries in some cases and we don’t have money to deliver essential services.
“There simply isn’t enough money in government to do what government wants to do. I am sure you will say that is because people are stealing or because you are wasting money, but I am saying even if you plug all the stealing and all the waste, the budget size is not big enough and that is because we are not paying enough in terms of taxes, or we are not collecting enough in terms of taxes.
“Statistics show our tax to GDP at 6 per cent, while the sub-Saharan Africa average is 17 per cent; Asia’s is 26 per cent. Most of the emerging markets and advanced countries are at 30-35 per cent.
“It is interesting, if you look at the statistics, there is no poor country that has a high tax to GDP ratio and there is no rich country with a lower one. And so, if we want to move with the prosperous countries, we have to do what they do.
“We will not achieve prosperity in Nigeria if we continue on the tax to GDP ratio that is in the peer group of Afghanistan. I’m sure none of us aspires for Nigeria to become like Afghanistan.
“We are trying to benchmark ourselves against more developed countries and we must address these problems in a more fundamental sense,” she submitted.
