As governance shifts wholly to politics without proactive measures towards revamping the ailing economy, the Lagos Chamber of Commerce and Industry (LCCI) has warned the tiers of government that the country’s debt-to-revenue ratio could hit 100 per cent by end of the year, if the country’s revenue levels do not increase significantly in remaining quarters.
President of the Lagos Chamber of Commerce and Industry, Dr. Michael Olawale-Cole, said Nigeria’s economy was already sitting on a keg of gun powder as governance has fully shifted to political campaigns. Olawale-Cole explained that the Federal Government must be sensitive and mindful of the relatively high debt-to-revenue ratio of about 90 per cent in 2021.
He added that failure to initiate measures to increase revenue without jeopardising the existence of the businesses that pay taxes to government could see Nigeria paying higher debt service-to-revenue ratio this year, which will further pile up pressure on the fragile economy and higher inflation rate.
According to him, the country’s debt sustainability position is worrisome in all ramifications following the continued huge borrowings to finance the 2022 budget and infrastructure in the country. According to him, the Federal Government spent N2.05 trillion on domestic debt servicing and $2.11 billion (N880 billion) in 2021.
Also, the LCCI president stated that Nigeria’s total public debt as of December 31, 2021, was N39.556 trillion or $95.779 billion. To him, the amount represents the total external and domestic debts of the Federal Government, the 36 states and FCT.
He added that the comparable amount for December 31, 2020, was N32.915 trillion or $86.392 billion. Olawale-Cole explained that “with the total public debt stock to gross domestic product (GDP) of 22.47 per cent, as of December 31, 2021, the debt-to-GDP ratio remained within Nigeria’s selfimposed limit of 40 per cent.
“This ratio is prudent when compared to the 55 per cent limit advised by the World Bank and the International Monetary Fund (IMF) for countries in Nigeria’s peer group, as well as the ECOWAS Convergence Ratio of 70 per cent.
“However, the Federal Government must be sensitive to and mindful of the relatively high debt-to-revenue ratio of about 90 per cent in 2021. “We must initiate measures to increase revenues without jeopardising the existence of the businesses that pay taxes to the government.”
Speaking further, the LCCI president said: “We as a chamber project that Nigeria’s debt stock and debt-servicing to revenue ratio will remain elevated in 2022. “The Federal Government still plans to borrow an additional N1.6 trillion, while the 2022 debt target for domestic borrowing is N2.57 trillion.
“There is also a plan to borrow N2.57 trillion from foreign creditors, while N1.16 trillion is expected from multilateral/bilateral drawdowns. In total, the Federal Government plans to add N6.3 trillion new debts to the current debt stock, which would push the country’s total debt stock to N45.86 trillion by December 2022.”
The renowned industrialist added: “The 2022 FGN budget is now projected to have a deficit of N7.35 trillion from the approved N6.26 trillion if the recent request for an additional deficit of N965.4 billion by the President presented to the National Assembly is granted.
“In total, the Federal Government plans to add N6.3 trillion new debts to the current debt stock, which will push the country’s total debt stock to N45.86 trillion by December 2022.