According to the World Bank, Nigeria’s major challenge is that it spends all of its revenues on debt servicing rather than investing in infrastructure.
Unless broad-based reforms are implemented to ‘unfreeze’ the fiscal space, Nigeria’s debt service cost-to-revenue ratio could reach 160 percent in five years.
Arunma Oteh, former Treasurer and Vice President spoke at the Seplat youth entrepreneur celebration recently.
The economist said in her speech, titled ‘Unleashing Nigeria’s Untapped Potential Through Entrepreneurship and Sustainability,’ that the country needs to invest more in infrastructure and look beyond debt servicing.
The federal government announced in January that a total of N5.24 trillion was spent on debt servicing between January and November 2022, out of N6.5 trillion in retained revenue for the same period.
This puts the country’s debt service-to-revenue ratio at 80.6 percent for the period under consideration, well above the World Bank’s recommended 22.5 percent for low-income countries like Nigeria.
The government also stated that the 2023 budget deficit would be paid for with additional borrowings.
In response, Oteh stated that the country cannot survive by servicing debts.
“Give or take, we are spending all of our revenues on debt servicing. At a forum on Thursday, I said to the participants can you imagine a household where you haven’t paid for your children’s education and transport, and there’s a health problem, you can’t pay,” Oteh said.
“You are just taking all that money and using it for debt servicing. There’s no household that can survive like that. On top of that, we have an inflation rate of over 20 percent.
“We have not invested in infrastructure. We have not invested in education, no country can survive a future without those kinds of investments.”
She mentioned that Nigeria has a vast group of entrepreneurs who can help her solve her multifaceted poverty and challenges, because entrepreneurs see opportunities where others see problems, and they are creative, innovative, tenacious, and problem solvers.
Oteh, on the other hand, stated that Nigeria needed to overcome SMEs’ challenges, which included an unfavorable business environment, limited access to credit, and an epileptic power supply.
“We need to sort out power because businesses suffer more and the cost of doing business in Nigeria is higher than in other countries,” she said.