Onyinye Nwachukwu, Washington DC
Nigeria’s Minister of Finance, Kemi Adeosun said at the weekend that Nigeria’s debt level was sustainable, a statement she made in obvious response to concerns by both the World Bank and International Monetary Fund on rising debt levels in majority of low income and developing economies.
About 40 percent of low income countries in the Sub-Saharan Africa region are already in debt distress or in high risk of debt crisis, according to the IMF.
By end of 2018, Nigeria would have borrowed some N5.839.27 trillion just in three years, to fund the budget deficits and Debt-to-GDP Ratio currently stands at about 18.20, though lower than standard peer group threshold of 56 percent.
But serious concerns are being raised at the 2018 IMF/World Bank spring meetings in Washington DC around the debt service, particularly as the country struggles with low revenues from tax.
But Adeosun said Nigeria had nothing to worry about.
“It’s correct that debt levels in low income countries is a threat but Nigeria is better described as a middle income country.
“The concern that has been expressed and it’s a legitimate one, is that debt levels in those countries are at 55 per cent of GDP which is very high but Nigeria’s is at less than 20.
“So we are not one of the countries they have expressed concerns about. However, we will continue to manage our debt very responsibly.
“We are at 20 per cent of GDP and we do not intend to grow it aggressively. We are doing well at the moment as debt rate to revenue is going down gradually, as we replace debt with revenue and refinancing our debt, ” She said.
Adeosun said that the government would keep monitoring and analysing its debt levels at every stage, so that they don’t fall into the trap that most African states had fallen into.
Defending her stance, Adeosun said that economic recession and near collapse of major sources of income, which which she said was inherited from the President Jonathan’s administration, the government was compelled to borrow in order to save the country.
She said, “I don’t like to look back but if you look at the situation we inherited in 2015, it was a collapse in our major source of income, growth had curved, reserves were not there and debts were rising.
“There were two options; one was cut back, lay people off and wait for oil prices to recover or be more aggressive, expand your budget, take on more debts and invest in infrastructure in hope that you will get growth going to develop more revenue.
“Now, step one and two and three of that have been done. We’ve expanded our budget, we pumped money into the economy, we made sure recession was not prolonged. We are now back into growth, we need to accelerate that growth and focus on revenue mobilization which in turn will reduce our debt pressures.
“That was the strategy we outlined and that was what we executed so I don’t agree that N2.3 trillion is a large part, it’s relative to what? If we were still in recession, we’d have far bigger problems. I think what people haven’t realised is how much work had to be done to make sure that that recession was as short as possible because that would have caused real pain for the people.
“Some of the ministers that I was in meeting with, they are still in recession; they haven’t been able to get out of it yet. That means real pain for a long time. We shortened it, we had to borrow to do so and we make no apologies for that.
“That was the right thing to do. We invested N1.3 trillion in infrastructure, in capital projects that will support industralisation growth and we are starting to see the investments coming back in. Investors are saying we are opening up here and this is good news for Nigeria so I think we are on the right path.
“I make no apologies for that, that was the right thing to do,” she maintained.
On the issues raised at the meeting about ensuring that borrowed funds are effectively utilised to fund development, especially human capital, she said a country with a huge population like Nigeria presents huge priority and that the government is committed to development.
“What we need to do is more focus and more data so that we really understand how much we are investing. It is not really about the amount you are investing it is about the outcomes. If we continue to measure education by how much do we spend, we will always get the wrong result. It is not how much we spend in schools, it is what do they come out learning.
“So we need quality based approach to invest in human capital, but short term objective is to really plug this infrastructure gap because it must be plugged quickly so that we can industrialize and create jobs, it is those jobs and those businesses that will then pay tax and enable us reinvest more in human capital and that is really important for our development.
