Nigeria has poor repayment ability of debt — Veteran economist, Yemi Kale
A chief economist and partner of KPMG Nigeria, Oyeyemi Kale has said that Nigeria’s repayment ability of debt is poor and this has generated the perception that the country’s debt is huge beyond control.
The former statistician-general of the federation made this revelation in a series of tweets released on Saturday April 1.
The economic enthusiast said improvement in revenue generation would relieve the country’s debt.
According to Kale : “Debt has 2 issues. What it is being used for & ability to repay. Debt/GDP represents capacity to repay & is 6-8-%, so there is revenue in the system to repay. But Debt/Rev which is ability to repay is poor at about 80% so not enough revenue is being retrieved from the system,” his tweet reads.
“If ability is enhanced through revenue reforms so that ability is raised towards capacity then the conversation about our size of debt disappears. Nigerian debt is only perceived to be too much because ability to pay is poor despite an arguably comfortable capacity to do so.
“In a Nation that needs huge capital expenditure to develop, do we: 1. Curtail debt in the presence of poor revenues which slows development; 2. Borrow & focus energy on revenue reforms to repay debt; 3. Stop borrowing & generate the revenue first which also slows development.
“By the way, there are many other models to fund needed investments but my post is focusing on the particular issue of debt and its issues related to revenue and needed expenditure.”
As earlier reported by The Informant247, the Debt Management Office revealed an increase in the country’s total public debt stock to N46.25tn or $103.11bn in the fourth quarter of 2022.
The country’s debt figure was N44.06tn as at September 2022.
The DMO explained that the new statistics consists of external and domestic total debt stocks of the federal government and the sub-national governments (36 state governments plus the Federal Capital Territory).
As of December 31, 2021, the comparative figure of public debt was N39.56tn or $95.77b — which implies that the country’s debt uplifted by N6.69trn or $7.34bn within 1 year.
The DMO said new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects and the issuance of promissory notes to settle some liabilities also contributed to the growth in the debt stock.
In a debt profile breakdown, the commercial hub of the nation, Lagos, tops the states with the highest debt profile recording a total of N807.21 billion in Q4 2022, while Delta came in second with N304.25 billion and Ogun with N270.45 billion.
Jigawa recorded the lowest debt with N43.95 billion followed by Kebbi and Katsina with N61.31 billion and N62.37 billion respectively.
The agency said in a statement; “As of December 31, 2022, the total public debt stock was N46.25tn or $103.11bn. In terms of composition, total domestic debt stock was N27.55tn ($61.42bn) while total external debt stock was N18.70tn ($41.69bn).
“Amongst the reasons for the increase in the total public debt stock were new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects. The issuance of promissory notes by the FGN to settle some liabilities also contributed to the growth in the debt stock.
“On-going efforts by the Government to increase revenues from oil and non-oil sources through initiatives such as the Finance Acts and the Strategic Revenue Mobilization initiative are expected to support debt sustainability.
“The total public debt to gross domestic product (GDP) ratio for December 31, 2022, was 23.20 per cent and indicates a slight increase from the figure for December 31, 2022, at 22.47 per cent.
“The ratio of 23.20 per cent is within the 40 per cent limit self-imposed by Nigeria, the 55 per cent limit recommended by the World Bank/International Monetary Fund, and, the 70 per cent limit recommended by the Economic Community of West African States.”
