Nigeria’s debt-to-income ratio is worrying, warns LCCI FG
THE Lagos Chamber of Commerce and Industry has warned the Federal Government that maintaining the current debt-to-GDP threshold is not a reliable means of calibrating Nigeria’s current debt burden.
According to the chamber, the government must review its borrowing parameters based on the country’s debt-to-revenue ratio, which the chamber says is currently causing concern.
Speaker of the House, Asiwaju Michael Olawale-Cole said so during the LCCI’s quarterly economic outlook press conference in Lagos on Tuesday.
He noted that the Federal Government spent N2.05 billion on domestic debt service and N880 billion in 2021 and Nigeria’s total public debt as of December 31, 2021 was N39.556 billion, which represents the total external and internal debts of the federal government, 36 states, and the Federal Capital Territory.
He said: “With a total stock of public debt to gross domestic product of 22.47%, as of December 31, 2021, the debt-to-GDP ratio remains within the self-imposed limit of 40%. This ratio is conservative compared to the limit of 55% recommended by the World Bank and the International Monetary Fund for countries in Nigeria’s peer group, as well as the ECOWAS convergence ratio of 70%.
“However, the federal government must be sensitive and aware of the relatively high debt-to-revenue ratio of around 90% in 2021. We must take steps to increase revenues without jeopardizing the existence of businesses that pay taxes to the government.”
He added, “We expect Nigeria’s debt stock and debt service-to-revenue ratio to remain high in 2022. domestic debt target for 2022 is N2.57 trillion.
“There are also plans to borrow N2.57 billion from foreign creditors, while N1.16 billion is expected from multilateral/bilateral drawdowns. In total, the federal government plans to add 6.3 tn of new debt to the current debt stock, which would bring the country’s total debt stock to 45.86 tn by December 2022.”
According to the LCCI, as we approach the second quarter of 2022, the manufacturing sector is likely to experience shocks from the rising cost of diesel, logistics, currency illiquidity, domestic inflationary pressure, weakening purchasing power, poor public infrastructure and port problems. challenges.
The likely development, he said, could continue to present headwinds to sector performance.
“Additionally, with the war in Ukraine worsening disruptions to supply chains of raw materials like wheat, barley, soybeans, sunflowers and corn, rising production costs may not come down any time soon,” Olawale-Cole said.
According to the chamber, the government should explore ways to resolve the lingering fuel supply crisis by increasing imports to meet growing demand which is putting pressure on diesel and fuel prices.
“It has also become imperative now that Nigeria needs to have reserves of these essential commodities that can be accessed to deal with sudden supply slumps.” added the president of LCCI.
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