Nigerian government is under pressure to boost non-oil revenue as it continues to use the large chunk of generated revenue to service debt, raising concerns about the deteriorating debt position.
Some experts are of the view that government has exceeded its borrowing limit while its N7.4 trillion budget is a drop of water in an ocean given a copious infrastructure deficit undermining economic growth.
Between January and June, over 90 percent of government revenues were channelled toward debt serving, according to available data from the National Bureau of Statistics (NBS).
The country’s interest payments-to-revenue ratio doubled last year to 66 percent of revenue, according to the International Monetary Fund.
According to a September 19 report by the NBS, Nigeria’s overall foreign debt, stood at $15.1 billion as of June 30, while domestic debt was N14.1 trillion.
The plans by the government to borrow all-out N330 billion, split across the 5-year (2021) and the 10-year (2027) at N165 billion apiece, potentially adds to the growing debt service cost of 62 percent as at the second quarter.
Nigerian government has issued $100 billion Sukuk while it also intends further issue $5.20 billion of Europe bond in the next three months to fund capital expenditure.
While the good news is that the country is in an advantageous position to borrow from the international market because of recent improved fundamentals, another round of militant attack on oil facilities and sudden drop in the price of oil could deal a great blow on revenue.
A robust tax base will help diversify the economy way from over reliance on oil.
The volatility in oil price, political instability in the Niger Delta region and the huge infrastructure deficit calls for government to improve its tax collection mechanism.
Finance Minister Kemi Adeosun recently bemoaned the country’s very low tax to GDP ratio, which is one of the lowest in the world.
However the government plan to improve tax revenue through voluntary compliance will help diversify the economy away from oil.
The chairman Federal Inland Revenue Services (FIRS) Babatunde Fowler, also said that the government is putting in place plans to track tax defaulters using phone bill records and Bank Verification Numbers (BVN).
“Individuals, who spend above a certain threshold on their phone bills, would be examined to ascertain their tax bills. The same method would also apply to individuals with BVN,” said Fowler.
Already, the Federal Inland Revenue Service, through tax collection, generated the sum of N2.11 trillion as revenue from January to July this year.
It is imperative for the Nigerian government to boost non-oil revenue because it doesn’t have the resources to fund huge capital projects across the country.
The Head of Energy Research, Ecobank Plc, Dolapo Oni, said that Nigeria would require a minimum of $30bn (about N9.47tn) annual investments to bridge the infrastructure gap that exists in the economy.