The Debt Management Office (DMO) has warned the Bola Tinubu-led Federal Government against taking additional loans from China and other countries.
Following a review of the country’s debt profile in 2022, the DMO issued the warning on Thursday.
The DMO encouraged the federal government to focus on improving revenue production, emphasizing that debt service will consume 73.5% of this year’s revenue.
It said that increasing revenue from the N10.49 trillion envisaged in the 2023 budget to almost N15.5 trillion would be required to achieve a sustainable Debt Service-to-Revenue ratio.
The agency added that the government can reduce borrowing through privatization and/or the sale of government assets.
DMO’s analysis revealed that the Total Public Debt-to-GDP ratio is projected to increase to 37.1% in 2023, mainly due to new borrowings, FGN Ways and Means at the CBN, and estimated Promissory Notes issuance.
While the baseline scenario indicates that the debt stock remains sustainable, the borrowing space has been reduced compared to the self-imposed debt limit of 40%.
The projected FGN Debt Service-to-Revenue ratio of 73.5% for 2023 exceeds the recommended threshold of 50% due to low revenue. This highlights the urgent need to significantly increase government revenue.
To minimize the rate of public debt increase, the DMO pointed out the necessity of complying to existing legislation on government borrowing, such as the Fiscal Responsibility Act 2007 and the Central Bank of Nigeria Act 2007.
Furthermore, the DMO advocated for a greater emphasis on revenue collection measures and reforms to boost the country’s tax revenue to GDP ratio.
It also proposed enlisting the private sector to help fund infrastructure projects through Public-Private Partnerships (PPPs) and decreasing borrowing through the privatization or sale of government assets.
Ada Peter
