Fiscal Reforms Needed to Tackle Mounting Debt, Safeguard Social Spending, Says One Campaign

Ugo Aliogo

An advocacy organisation, ONE Campaign has called on President Bola Tinubu to urgently implement fiscal reforms to tackle Nigeria’s rising debt and unlock resources for important sectors that would benefit millions of poor and vulnerable Nigerians.

A new report published by the organisation, titled: “Fiscal Reform in Nigeria: Navigating Nigeria’s Debt Burden Whilst Protecting Social Spending,” revealed Nigeria’s complex financial hurdles.

The report noted that excessive borrowings over the past decade had resulted in a threefold surge in the country’s public debt stock.

The report further explained that Nigeria faced a worrisome debt service-to-revenue ratio of 91 per cent as of 2021, marking a significant increase from 29 per cent in 2014.

The statement noted that with projected external debt service reaching approximately $4 billion by 2025, up from $3 billion in 2023 and $2.5 billion in 2024, the country may encounter further challenges in debt repayment.

The report averred that Nigeria’s economy also suffers from insufficient revenue generation due to its heavy dependence on oil exports and failure to diversify, exposing the country to fluctuations in global oil prices and disruptions in local oil production.

The report asserted that the government’s inability to enhance revenue generation has adversely affected investments in crucial sectors that could drive economic growth and yield positive outcomes, impeding progress in reducing extreme poverty and multidimensional poverty among its population.

The report hinted that failure to act quickly could push 23 million additional Nigerians into poverty and leave 80 million working-age citizens without a full-time job by 2030.

The Country Director at ONE Campaign, Stanley Achonu, said: “As Nigeria grapples with rising debt and dwindling revenue, vulnerable citizens are disproportionately impacted due to a lack of government support in crucial areas that affect their well-being.

“Tackling these issues requires the government to take decisive actions that will ensure fiscal discipline and sustainable debt management and free up funds to invest in critical areas such as social protection, healthcare, agriculture, and education, among others. The challenges are not insurmountable, but only if the leaders are willing to act quickly before it is too late.”

 The report recommended that the President Tinubu-led administration deploy both domestic and international solutions to surmount the debt and revenue challenges.

 According to the report: “There is need to increase debt sustainability by committing to use concessional sources for all debt, refinancing where possible to reduce the amount of service paid. There is also need to increase debt transparency, particularly for terms agreed on collateralised debt, domestic subnational debt, and State-Owned Enterprise (SOE) debt. “Federal government should utilise innovations to refinance and reduce debt such as disaster clauses, debt swaps and other future opportunities to reduce debt and smooth payments. It is important to free up resources for investment in social sectors by blocking leakages in public finance, including the haphazard use of tax incentives.

 “It is important to prioritise government spending to maximise better outcomes that deliver on developmental goals. Divert funds to be saved from the fuel subsidy removal to better-targeted programmes like infrastructural development and direct cash transfers to the most vulnerable.”