Nigeria still in deep revenue problem, says Akabueze

After several denials about the state of the economy with numerous facts to support its continuous borrowing, the Federal Government has finally admitted that the nation is in a deep revenue problem.

Though, the crude oil price has been rising since the beginning of 2018 and the Brent Crude, which the Nigeria’s oil is priced recently climbed $80 per barrel, however, this increment in Nigeria’s biggest revenue earner has not translated to corresponding growth in its revenue.

Answering questions from participants at the Strategic Dialogues on Morocco-Nigeria relations, Director of Budget in the ministry of Budget and National Planning, Ben Akabueze, said the rate of Nigeria’s expenditure growth is not matched with that of its revenue, thereby, leading to the current revenue problem.

He also explained that despite the strong oil prices, Nigeria is not seeing a corresponding growth in her revenue generation.

“For us in Nigeria, lately there has been a lot of talk about government’s borrowings 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.”

Nigeria’s debt to GDP ratio has been rising gradually, since the country’s debt stock has been increasing in the past three years.

Nigeria’s total debt stock stood at $73.21 billion, as the end of June 2018 from $63.81 billion as at June 30, 2015. Nigeria set out N2.01 trillion for debt servicing in the 2018 budget, thereby increasing its debt servicing to GDP ratio to 1.74%, with a budget deficit of N1.95 trillion. However, the Budget Director believes Nigeria’s debt to ratio still calls for no concern.

“But instead of having a discussion around the revenue issue, we are talking about the debt. Morocco, for instance, has a 63 per cent debt to GDP ratio; we have a 20 per cent debt to GDP ratio. Morocco has over 3.4 per cent deficit to the GDP ratio; we have a statutory cap of three per cent.”

He added, “The real issue is that in 2017, for instance, our debt service to revenue ratio crossed 60 per cent. There are two options of a policy standpoint in trying to address the numerator, which is debt, at a time when you have huge infrastructure deficit that needs to be addressed.

According to the Director, this was not unconnected with the fact that Nigeria was spending more to import virtually all the refined products from crude oil i.e. petrol, diesel and kerosene.

Akabueze went on to add that while Nigeria export its crude oil at about $80 per barrel, it effectively import the same crude back at about $100 price for refined petroleum products.