The International Monetary Fund (IMF) has attributed Nigeria and other Sub-Saharan Africa’s economic woes to the percentage of amount being spent on debt servicing.
Specifically, the Breton Woods financial institution, on Thursday noted in Abuja at the presentation of the Regional Economic Outlook for Sub-Saharan Africa – Capital Flows and the Future of Work, that Nigeria spends more than 50 per cent of its revenues on servicing debts, a situation he said does not give room for other necessary expenses.
Senior Resident Representative and Mission Chief for Nigeria, African Department, Amine Mati while speaking, also put Nigeria’s growth rate for 2018 at 1.9 per cent.
According to Mati, although Nigeria’s debt to Gross Domestic Product remained low at between 20 and 25 per cent, the country spent a high proportion of its revenue on debt servicing as a result of low revenue generation.
“Security issues are exacting a significant human toll in a number of countries. Debt to GDP ratio is increasing in the past five years. Public debt is diverting more resources towards debt servicing.
“The interest rate has gone up to where they used to be around the year 2000 before the debt relief.
“The adjustment has relied on spending compression rather than revenues mobilisation. Meeting the Sustainable Development Goals will require stronger growth and more financing,” Mati said.
He added, “For Nigeria, the debt servicing to revenue ratio was more than 50 per cent while for sub-Saharan Africa, the rate was about 10 per cent”; a figure he said “was too high and reminiscent of what the region went through in the period following debt relief at the beginning of the 21st century.”
Speaking further, the IMF Chief also disclosed that Sub-Saharan Africa needed to create 20 million jobs every year in order to meet SDGs.
He said, “Policies are needed today to create more jobs in the coming years. Twenty-million jobs are required every year in Sub-Saharan Africa to meet the SDGs.
“Job creation is complicated by uncertainty to which technology replaces labour,” he said.
In her part, while also speaking at the event, Director-General of the Debt Management Office, Mrs Patience Oniha, stressed that it was important for the government to borrow especially given the nation’s low revenue generating capacity.
According to her, without sufficient revenue and with the recession that the country found itself between 2016 and 2017, the government had no option but to borrow and spend the country out of recession.
“We are borrowing to be able to increase forex availability. The government needed to borrow in order to spend the country out of recession,” Mrs Oniha said.
The DMO boss further disclosed that the government had proposed to borrow N 1.5trn in the 2019 fiscal year, saying that borrowing had reduced as the nation was now out of recession.
She explained that in 2016, the Federal Government borrowed N2.5trn which was approved by the National Assembly while it proposed to borrow N1.64 tn in the current financial year.
Oniha added that in 2019, proposed debt of N1.5trn had gone further down, adding that the government had taken steps to diversify the economy and increase tax collection which she said was lower than in most countries of the Economic Community of West African States.