In the same logic, agricultural activities are majorly tax-exempted, implying that the sector is not a cash cow

In the same logic, agricultural activities are majorly tax-exempted, implying that the sector is not a cash cow

This suggests that sectors that drive GDP, which historically informs government’s borrowing, do not provide the liquidity needed to service debt, economists have argued.

Dr. Bongo Adi, an economist at the Pan-Atlantic University had maintained that revenue consideration is a major factor, much more relevant than GDP, when analysing debt sustainability.

In 2020, which is still the most recent complete data on economic performance, the government spent N2.43 trillion, which was 71 per cent of the amount available for budget funding, on debt servicing. This was contained in the budget implementation report released by the Ministry of Finance, Budget and National Planning a few weeks ago. The overall figure was a modest when the government earned N billion and incurred N billion on debt-servicing.

The Federal Government had spent N2

As at September last year, the debt servicing to revenue ratio of the running budget was 65 per cent. 57 trillion servicing debt within the period its earned revenue was N3.95 trillion.

David Adonri, Vice Chairman of Highcap Securities Limited, said the near-70 per cent debt servicing to revenue ratio and the fact that the government is refining some existing debt obligations indicates that the country’s debt situation is already in crisis.

“When debt gets to the level we are in now, there is a crisis. When your debtor has to raise a new debt instrument to settle the previous one, the country is tending towards sovereign default. And that is alarming,” he said.

Adonri said the government must rationalise its expenditure and stop ‘over-trading‘, which he said has no real value other than helping the government to score a political point.

“We are already in a debt trap due to the recklessness of the government. And the government is going further. There is a clear signal that the current debt is not sustainable. The government must rationalise its spending and look inward online payday HI for funding. It can actually get to that stage, and happens soon if we don’t take urgent steps to remedy the situation,” the economist noted.

Also speaking, Prof. Godwin Owoh, a debt management expert, said the government is excessively carried away by the desire for mechanical infrastructure growth. He insisted that every society that intends to grow inorganically – growth that is not supported by the expansion in the incomes of households – falls into the mess the country is currently in.

It has to cede certain responsibilities to the private sector to prevent a situation where external partners would not have confidence in us and all our transactions will be cash-based

According to him, the country will still achieve much-needed sustainable development if the government concentrates only on fighting corruption and insecurity while allowing the economy to drive itself.

“We don’t need that bogus infrastructure. Who will use the infrastructure when most people are hungry? Provide basic infrastructure and allow the economy grow organically. That will create a reasonable surplus that will drive further growth. Every state wants to have an airport. What is the need?” he said, adding that research has established that the growth of conduction has a positive correlation with the level of corruption in a society.

He insisted that the infrastructure Nigeria borrows to deploy is not supported by the growth of household income, noting that “expensive outlay does not lead to development” but that development happens when household incomes improve on a sustainable basis.

Prof. Sheriffdeen Tella of the Olabisi Onabanjo University aligned with Owoh’s argument, saying that the government should prioritise health and education while scaling down investment in road and airport infrastructure. The scholar said the persistent uncertainty around revenue makes the times more “precarious.”

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