WED 06 APRIL, 2022-theGBJournal| The rising debt profile of government raises serious sustainability concerns. The Debt Management Office had reported that total public debt was N39.56 trillion as at December 2021. 11.3% of this debt is owed by the states and FCT.
However, when we take account of borrowings from the CBN and the stock of AMCON debt, the debt profile would be in excess of N50 trillion.
Although government tends to argue that the conditions was not a debt problem, but a revenue challenge. But debt typically becomes a problem if the revenue base is not strong enough to service the debt sustainably. It thus becomes a debt problem. Government actual revenue can hardly cover recurrent budget. Which implies that the entire capital budget and part of recurrent budget would are being funded from borrowing. This is surely not sustainable.
We cannot continue to increase borrowing on account of the relatively low Debt/GDP ratio. We do not service debt with GDP, but with revenue. Close to 40% of our GDP do not contribute appreciably to revenue.
We need the political will to cut expenditure and undertake reforms that could scale down the size of government, reduce governance cost, ease the fiscal burden on government and boost revenue. It is important to ensure that the debt is used strictly to fund capital projects, especially infrastructure projects, that would strengthen the productive capacity of the economy. Additionally, emphasis should be on concessionary financing, as opposed to commercial debts which are typically very costly.
It is imperative for the country to operate as a true federation which it claims to be. The unitary character of the country is making it difficult to unlock the economic potentials of the subnational. It is perpetuating the culture of dependence on the federal government. It is necessary to scale down the size of government and cost of governance. We should note that fiscal sustainability is driven by both cost and revenue.
Therefore, managing the major drivers of cost and revenue is imperative. As far as possible, the government should pushback in sectors or activity areas where the private sector has capacity to deliver desired outcomes. We should see more concessioning and privatisation at all levels of government. This would allow for the infusion of more private capital into the infrastructure space.-With CPPE comment
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