Financial and economic experts have expressed concerns over the International Monetary Fund’s debt service-to-revenue ratio projection for Nigeria.
The IMF had on Monday predicted that Nigeria’s debt service-to-revenue ratio would jump to 92 per cent in 2022 from 76 per cent in 2021.
The experts, who spoke to our correspondent in separate interviews, said such a percentage would plunge the country into huge debts, deepen the poverty rate and worsen the infrastructural deficit.
A development economist, Aliyu Ilias, said the refusal of the government to remove petrol subsidy might significantly increase expenditure in the year, forcing the government to resort to borrowing to close its widening fiscal deficit.
He said, “The consequence will be a larger infrastructural deficit; it will also deepen poverty, and forex will be a problem because we will have to go cap in hand to borrow again. And when we do that, there will be more problems.
“Already the government has said that it will borrow about N6tn but now that they have to retain fuel subsidy with a larger cost that wasn’t captured in the budget, that means expenditure will increase and so will our fiscal deficit.
“Also, capital expenditure will be the worst hit if the government continues the way it is going, which will mean no infrastructure for Nigeria. All the money may be spent on recurrent expenditure, which will erode development.”
Ilias advised the government to seek better ways to generate revenue such as widening its tax net and privatising its assets.
An economist and professor of Economics at Olabisi Onabanjo University, Ogun State, Sheriffdeen Tella, said, “The impacts will be poor growth and development, because the money that should be spent on capital and development projects will be used for debt servicing.
“As such it will be unlikely that we will meet our growth expectations.”
He, however, argued that the government may not have to increase its borrowing if the price of crude oil continues to rise as it is the main source of government revenue.
The Managing Director, Cowry Asset Management Limited, Johnson Chukwu, said the projection of the IMF was expected as the government spent over 70 per cent of its revenue on debt servicing as of November 2021.
He said the government could offset the negative consequences associated with its rising debt profile by cutting out unnecessary expenditure from its budget.