The International Monetary Fund has said Nigeria’s major fiscal challenge is its “very low revenue” and not so much of its debt profile.
The low revenue, it explained, had led to low debt-servicing capacity and limited funding for critical sectors such as education, health and social welfare.
The IMF said it considered Nigeria’s public debt stock average at 29 per cent of its Gross Domestic Product as of the end of 2019, when compared to emerging and developing market average, which is about 53 per cent of GDP.
It noted that the 29 per cent includes not just government’s debt, but takes into account overall public sector liabilities, such as Central Bank of Nigeria’s overdraft, Asset Management Corporation of Nigeria’s debt and other things.
IMF’s Mission Chief and Senior Resident Representative for Nigeria, Jesmin Rahman, said these on Tuesday at a webinar hosted by the Nigerian Economic Summit Group, Fiscal Policy Roundtable and Tax Investment and Competitiveness Policy Commission.
She said, “The first vulnerability comes from having very low level of fiscal revenues. Total revenue at seven per cent of GDP is less than half of sub-Saharan Africa’s average and far lower than the average in oil exporting countries.
“It is also lower than the minimum threshold of 12 per cent, which is considered necessary for governments to provide an enabling and growth-enhancing role. Interest payments take up a large share of revenues, leaving little resources for everything else.”
“When we do our in-depth analysis, public debt is projected to reach about 37 per cent of GDP this year and remains roughly around that level in the medium term.
“We do various stress scenarios in our debt sustainability analysis and in all of those scenarios, public debt does not go beyond 50 per cent of GDP.
“So, I will not say that public debt is having a crisis or that public debt is extremely high. It is really a revenue issue; very low and volatile revenue is what poses a lot of fiscal risks and there are sizable financing risks in the next 12 months.”