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Home » Amid Surging Debt, Analysts Advocate for Domestic Resource Mobilization

Amid Surging Debt, Analysts Advocate for Domestic Resource Mobilization

Justice Godfrey Okamgba by Justice Godfrey Okamgba
July 11, 2023
in Economy
0
Advocacy for Domestic Resource Mobilization

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As Nigeria’s public debt reaches alarming levels, analysts are increasingly emphasizing the urgent need for domestic resource mobilization. With the government’s self-imposed debt-to-GDP limit of 40% rapidly approaching, concerns about debt sustainability and overreliance on external borrowing are mounting.

This report examines the viewpoints expressed by key stakeholders, including the President of the Institute of Chartered Accountants of Nigeria (ICAN), Innocent Okwuosa, and the recommendations put forth by KPMG, highlighting the necessity of sustainable debt management and exploring alternative funding avenues for development.

Advocacy for Domestic Resource Mobilization

ICAN President, Innocent Okwuosa, has called for a shift in Nigeria’s approach to financing development.

He asserts that the loans taken by the government are not necessary, contending that the country possesses vast untapped resources that could be leveraged to generate funds internally.

Okwuosa cites the lack of indigenous scientists and petroleum engineers in the oil industry despite decades of oil exploitation, attributing this to an unfavorable environment.

He emphasizes the need for creating an enabling environment that fosters the utilization of Nigeria’s human capital, thereby eliminating the need for excessive borrowing.

DMO’s Projection and Debt-to-GDP Ratio

The Debt Management Office’s projection, outlined in the 2022 Debt Sustainability Analysis (DSA) Report, raises concerns about the rising debt-to-GDP ratio. The projection indicates an increase from 23.4% in September to the projected 37.1% by the end of the year.

This rise is attributed to new borrowing and the Central Bank of Nigeria’s loan-to-bond swap. The growing debt burden necessitates a critical examination of Nigeria’s borrowing practices and the implications for long-term debt sustainability.

Government’s Borrowing Plans and Debt Conversion

To cover the budget deficit, the Federal Government plans to borrow N8.8 trillion in 2023. Additionally, temporary overdrafts worth N23 trillion have been converted into long-term bonds this year.

These measures indicate the government’s reliance on borrowing to finance its expenditures. While borrowing may be unavoidable in some cases, it is essential to evaluate the impact of increased debt on the country’s financial stability and economic growth.

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Sustainable Debt Management

KPMG, a renowned professional services firm, advises the Nigerian government to establish comprehensive guidelines and frameworks for borrowing. They emphasize the importance of sustainable debt management and urge prioritizing investments that yield long-term economic returns.

KPMG highlights the need to strike a balance between deficit financing for governance and stimulating economic growth. They also suggest reevaluating legal and self-imposed restraints and buffers related to deficit financing to accommodate the government’s borrowing requirements.

Recap

Nigeria’s rising public debt and the approaching self-imposed debt-to-GDP limit necessitate a reevaluation of the country’s borrowing practices.

The viewpoints expressed by Innocent Okwuosa and KPMG underline the significance of domestic resource mobilization and sustainable debt management.

Balancing the need for funding development initiatives with long-term debt sustainability is crucial for Nigeria’s economic stability.

The government must carefully consider alternative avenues for financing, foster an enabling environment for domestic resource utilization, and establish robust frameworks to guide borrowing decisions.

A prudent and strategic approach to debt management will play a vital role in ensuring Nigeria’s economic resilience and future growth

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  • Justice Godfrey Okamgba
    Justice Godfrey Okamgba

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