At the launch of the World Bank’s Nigeria Public Finance Review (PFR) fiscal consolidation for better and more sustainable release, which took place in Abuja, the World Bank warned that it could take Nigeria 300 years to fix its infrastructure problems if it keeps spending money the way it does now. This is why it needs to start spending money more wisely and is a cause for concern, as the bank has stated that Nigeria’s public investment spending falls behind its counterparts, resulting in the nation’s poor infrastructure.
The World Bank’s chief economist, Alex Sienaert, stated in his presentation that Nigeria has the least government spending in the world right now while also dealing with low revenue, which poses a serious threat to its capacity to pay off its debt and balance its budget. The country wastes a significant portion of its finite resources on untargeted and unproductive subsidies while social areas such as health and education suffer, he remarked. He predicted that Nigeria would spend up to N4.8 trillion on fuel subsidies in 2022, with the figure rising to N5 trillion in 2023. Only 3% of all subsidized gasoline is bought by the poorest 40% of the population. Nigeria’s low gasoline prices encourage smuggling to neighboring countries and mostly help the rich.
Nigeria needs to spend efficiently and increase its revenue – Sienaert.
Furthermore, the chief economist advised that Nigeria must spend more wisely, grow its revenue, and fortify its institutions if it is to achieve its budgetary objectives and enhance service delivery. Further borrowing is not the answer, he said, because debt servicing has skyrocketed over the previous decade and is anticipated to continue rising over the medium term, thereby preventing any additional money from being spent on anything else. He also noted that overly optimistic revenue estimates have led to continually greater than expected fiscal deficits. Therefore, improved budgeting would result in substantial fiscal savings.
Patience Oniha, the Debt Management Office (DMO) director-general, said it was not a good idea for Nigeria to keep borrowing money, especially since its debt stock has grown rapidly in the last few years. She said the country should be bringing in revenue from various sources and making more money to pay off debt. She admitted that some of Nigeria’s neighbors in Sub-Saharan Africa have a far higher debt-to-GDP ratio, but they have significant tax revenue to GDP. As debt stock grows, so does debt service. 60% of the foreign debt stock is made up of concessional loans, but it would be better to have 100% concessional loans from the outside.
Country’s debt stock has risen over the last few years.
Ben Akabueze, the director-general of the Budget Office, suggested that in an effort to increase revenue, the country should tax the wealthy and require them to pay taxes on both their properties and their luxury products. If the rich can afford to own a private jet, they ought to pay a 100 percent tax on it. The country cannot avoid an increase in the tax rates such as VAT and excise duty. He added that we need to modify some tax laws and fasten controls on funds transfers to stop money from leaving the country. When talking about Nigeria’s oil infrastructure disparity, the DG said that Nigeria might not be able to set oil prices, but it can increase its volume by preventing oil theft.
More so, Doyin Salami, the president’s chief economic adviser, said that discussions about subsidy removal should focus more on progressive or immediate removal, particularly when the current state of the economy is taken into account. He also stated that the industry’s impact on the economy had dropped significantly. He added that if this keeps happening, jobs won’t be created, which will make income tax less effective. If individuals don’t want to pay taxes, they will have to pay more in interest as the country keeps borrowing money. He said that a lot more needs to be done and that Nigeria must establish an agro-industrial complex which can create more jobs.
The country should utilize its fiscal resources and grow its revenue.
While Salami affirmed that in order for Nigeria to benefit from the African Continental Free Trade Area (AfCFTA), the country needs to work on developing its agro-industrial sector. The country director for Nigeria at the World Bank, Shubham Chaudhuri, in his remarks, stated that the country has a significant need for funding which has not been fulfilled. As a result, the country’s government needs to raise its revenue and more efficiently use its fiscal resources.
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