The Director of Budget in the Ministry of Budget and National Planning, Ben Akabueze, has said that the country does not have a debt problem but a serious revenue problem.
Akabueze noted that the current revenue challenge of the nation, if not looked into, could finally lead to a debt problem.
The budget director made the statements while fielding questions from participants at the Strategic Dialogues on the Morocco-Nigeria Relations on Wednesday in Abuja.
“Lately, there has been a lot of talk about government’s borrowing and those who talk about it are justified to express the concern. But the truth is that I think we are generally having the wrong discussion. I personally don’t think we have a debt problem, but we have a serious revenue problem, which, if we do not address, will snowball into a debt problem.
“But instead of having a discussion around the revenue issue, we are talking about the debt. Morocco, for instance, has a 63 percent debt to GDP ratio; we have a 20 percent debt to GDP ratio. Morocco has over 3.4 percent deficit to the GDP ratio; we have a statutory cap of three percent,” he said.
Akabueze said the country major revenue issue started when its debt service to revenue ratio grew over 60 percent in 2017, noting that Nigeria’s economy was fragile and had huge infrastructure deficit which required enormous government spending to sustain and drive growth.
“Focusing on the numerator (debt) in times like this may not be the solution. This is why revenue is what we need to focus on,” he added.
While explaining why there has not been a corresponding increase in the nation’s revenue despite the recent surge in the prices of crude oil in the international market, he revealed that the Nigerian National Petroleum Corporation (NNPC) was paying N53 as subsidy for every litre of Premium Motor Spirit, otherwise called petrol, consumed in the country.
According to him, the amount, which is negatively impacting on the nation’s revenue, is referred to as under-recovery by the state oil firm.
“At the moment, in terms of pricing of petroleum products, for every litre of petrol, there is a N53 under-recovery. Well, that is the term that the NNPC, which has this responsibility, calls it and so who am I? This represents a significant value for us. Hence, the need to diversify the economy remains urgent,” he added.
Akabueze explained that for every increase in crude oil prices, there would be a corresponding increase in the cost of refining petrol, adding that since Nigeria imports most of the fuel it consumes, it spends more money to buy the product than it sold the crude.
He said, “The one single factor that determines the price of refined product is the price of crude. In essence, while we export the crude at about $80 (per barrel), we effectively import back the same crude at about $100 importation price for refined products. And that explains why despite the strong oil prices, we are not seeing a corresponding growth in government revenue.”
Data from the Debt Management Office (DMO) shows that Nigeria’s total public debt profile rose by 85 percent from N12.12 trillion in June 2015 to N22.38 trillion as of June 30, 2018.
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