The Lagos Chamber of Commerce and Industry has advised the Federal Government that sticking to the present debt-to-GDP ratio is an unreliable way of assessing Nigeria’s debt burden.
The government, according to the chamber, must reassess its borrowing restrictions in light of the country’s debt-to-revenue ratio, which the organisation believes is currently concerning.
Asiwaju Michael Olawale-Cole, the Chamber’s President, revealed this at the LCCI’s quarterly economic forecast news conference in Lagos on Tuesday.
He stated that the Federal Government spent N2.05 trillion on domestic debt servicing in 2021 and N880 billion in 2022, and that Nigeria’s total public debt as of December 31, 2021 was N39.556 trillion, which included the Federal Government’s, 36 states’, and the Federal Capital’s total external and domestic debts.
“With a total public debt stock of 22.47 percent of GDP as of December 31, 2021, Nigeria’s debt-to-GDP ratio stays within Nigeria’s self-imposed ceiling of 40 percent,” he stated. When compared to the World Bank and the International Monetary Fund’s 55 percent limit for nations in Nigeria’s peer group, as well as the ECOWAS convergence ratio of 70 percent, this ratio is conservative.
“However, the Federal Government must be aware of and sensitive to the relatively high debt-to-revenue ratio of around 90% in 2021.” We need to take steps to boost revenue without jeopardizing the viability of firms that pay taxes to the government.”
“As of December 31, 2021, the debt-to-GDP ratio for the overall public debt stock was 22.47 percent,” he stated.
“We expect Nigeria’s debt stock and debt-servicing to revenue ratio to remain elevated in 2022,” he added. The Federal Government intends to borrow an additional N1.6 trillion, with a domestic debt target of N2.57 trillion for 2022.
“There is also a plan to borrow N2.57 trillion from foreign creditors, with multilateral/bilateral drawdowns estimated to bring in N1.16 trillion.” The Federal Government intends to add N6.3 trillion in new debts to the existing debt stock, bringing the country’s overall debt stock to N45.86 trillion by December 2022.”
According to the LCCI, the manufacturing sector would certainly suffer in the second quarter of 2022.
According to the report, the probable development could continue to provide headwinds for the sector’s growth.
“Additionally, with the crisis in Ukraine causing further interruptions in supply chains for raw commodities such as wheat, barley, soybeans, sunflower, and corn, the rising cost of manufacturing may not abate anytime soon,” Olawale-Cole said.
The government, according to the chamber, needs to look into measures to overcome the persisting fuel supply crisis by expanding importation to meet rising demand, which is placing upward pressure on diesel and fuel prices.
“It is also becoming increasingly important for Nigeria to keep reserves for these vital commodities that can be accessed in the event of supply disruptions,” the LCCI president stated.
Source: PUNCH.
