The debt crisis of Nigeria, which has seen its debt profile climb by 410 percent over the last 8 years, has hit the manufacturing sector significantly hard, according to the Manufacturers Association of Nigeria (MAN). The MAN CEOs’ Confidence Index (MCCI) for Q1’23 was made available on Sunday, and in it, the group expressed concern that the N77 trillion in debt that President Bola Tinubu’s governance inherited would limit the government’s achievements if immediate critical steps were not taken.
According to the report, the public debt crisis is having unending repercussions for the manufacturing industry. First, private investment in manufacturing is being severely hampered by rising domestic debt. This is because of a decrease in access to credit and a subsequent increase in interest rates. Due to the reliance on foreign currency for the payment of external debts, a rise in demand for foreign exchange causes a further weakening of the naira and drives up the price that manufacturers pay to import non-locally produced key inputs.
Public debt decreases foreign investment and the influx of foreign capital.
Increasing cost of servicing debt is also consuming a greater volume of foreign currency, making the shortage a problem for the industrial sector for the past several years even worse. When a country is paying higher debt, it requires an increase in the level of revenue. Similarly, the Nigerian government has maintained its practice of breeding a hard environment for doing business by continuing to impose high and various taxes on manufacturers without discrimination. This is done in an effort to generate income for the government.
A significant public debt also led to a decrease in both foreign investment and the influx of foreign capital, all of which contributed to a worsening of the currency shortage. MAN additionally stated that contrary to the common belief among government officials that Nigeria has a revenue problem, the country’s debt dilemma is not an outcome of inadequate income, and it is counterproductive to consider manufacturing taxes as the final alternative for reducing the debt problem.
Devaluation of the naira and other factors impede the sector.
Moreover, the sector, which has continually been on the receiving end, hasn’t seen any substantial impact from debt finance on the several problems that have been hindering its performance for many years. Despite the enormous increase in the country’s debt profile of over 410% in the last eight years, the deterioration of infrastructure, the lack of availability of foreign currency, the tightening of credit, and the devaluation of the naira have become major concerns for members of MAN.
Taking grasp of the situation, in spite of the multitude of taxes, Nigeria primary issue is not the generation of revenue or even its collection, but rather, it is the diversion of revenue that has been collected so that it does not appear in the records. According to the report, MAN is of the opinion that debt worth N77 trillion is a significant weight to inherit and will most certainly limit the accomplishments of the new government.
MAN gave a detailed financial recommendation on the country situation.
Along the way, MAN recommended a few modifications be made: broadening the tax net to include more informal sector business operators and increasing the revenue base through better data acquisition. The Federal Inland Revenue Service (FIRS) should strictly enforce the Voluntary Assets and Income Declaration Scheme (VAIDS). To stop tax revenue from escaping the government, more work must be done to find and close tax loopholes. It is important to encourage budgetary restraint by cutting government spending and adhering closely to Section 41 of the Fiscal Responsibility Act and Section 38(subsection 2) of the CBN Act.
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Nigeria debt surge by 410% in 8 years – MAN. – N77 trillion debt inherited by President Tinubu may impact his administration. – Express your point of view.
I understand the concerns regarding the surge in Nigeria’s debt over the past eight years, with a reported increase of 410%. The inherited debt of N77 trillion by President Tinubu could indeed have an impact on his administration. It is crucial to address this issue and ensure responsible debt management to safeguard the country’s financial stability and future development.
Managing the national debt is a complex task that requires careful planning and strategic decision-making. It is important for the government to prioritize fiscal discipline, transparency, and accountability to effectively address the debt burden. By implementing prudent fiscal policies, exploring avenues for revenue generation, and promoting sustainable economic growth, Nigeria can work towards reducing its debt and ensuring a more stable financial outlook.
Additionally, it is essential to diversify the economy and reduce reliance on debt financing. By promoting sectors such as agriculture, manufacturing, and technology, Nigeria can create new sources of revenue and reduce the need for excessive borrowing. This approach, coupled with effective debt management strategies, can help mitigate the impact of the inherited debt on President Tinubu’s administration and pave the way for a more sustainable and prosperous future for Nigeria.
It is worth noting that addressing the debt issue requires collaboration and concerted efforts from all stakeholders, including the government, financial institutions, and the private sector. By working together, Nigeria can navigate the challenges posed by the debt surge and chart a path towards economic stability and growth.
The debt that President Bola Tinubu’s governance inherited would limit the government’s achievements if immediate critical steps are not taken to cushion the effect of the debt. Managing the national debt is a complex task that requires careful planning and strategic decision-making. It is paramount for the government to prioritize fiscal discipline, transparency, and accountability to effectively address the debt burden. And in so doing other avenues for revenue generation and economic growth, through this measure Nigeria can work again and ensuring a more stable financial outlook.
It takes careful preparation and wise judgment to manage the nation’s debt, which is a challenging responsibility. To properly handle the debt burden, the government must give top priority to financial responsibility, accountability, and openness. Nigeria can develop new revenue streams and cut back on its need for excessive borrowing. This strategy, together with efficient debt management techniques
President Tinubu’s administration faces enormous obstacles as a result of the large increase in debt he inherited. However, the administration may move toward stability through a strategic approach to debt management, attempts to diversify revenue sources, and improvements to openness regarding finances.