FG to Increase Debt to GDP Ratio to 18% in Five Years

Ugo Aliogo

The Minister of Budget and Economic Planning, Senator Abubakar Bagudu, has stated that one of the goals of the President Bola Tinubu’s administration, especially in the area of debt servicing, is to increase debt to Gross Domestic Product (GDP) ratio to 18 percent in the next five years.

He also stated that Nigeria is one of the countries with one of the lowest revenues to GDP ratio in the world, because the country collects less than most countries.

Bagudu, who disclosed this yesterday in Abuja during Public Finance Management Academy for Africa (PFMA) Dialogue on Debt Management Capacity Development with Africa Debt Managers, organised by the African Development Bank Group (AFDB), said part of the Renewed Agenda of the current administration is the setting up of a presidential committee to examine how the government can simplify Nigeria’s tax code, and even without increasing the tax rate, the government would be collecting more through efficient collection and digitalisation, “so that we capture our potential tax payers.”

He explained that Nigeria’s record with debt servicing is quite impressive historical because most of the debts contracted are from multi-lateral and bi-lateral institutions that don’t even give opportunity for Nigeria to default.

The minister revealed that Nigeria has never had a default in its debt servicing profile, adding that in the 90s, when they had too much debts, the federal government met with the Paris Club of Creditors, and they reconstituted the country’s debt. 

According to him, “We had Brady bonds that were issued at one time in order to manage our debt, and we had a debt buy back during former President Olusegun Obasanjo’s administration. These debt tools are utilised not only by Nigeria, but other countries. Debt servicing is a burden because we need more resources to fund our developmental needs more than we have. Nigeria is one of the countries with one of the lowest revenues to GDP ratio in the world because we collect less than most countries.”

In a related development, the African Development Bank Group unveiled the ‘Benchmark Macroeconomic Models for Effective Policy Management in Africa’ report.

Speaking on the report, the President of African Development Bank Group (AfDB), Dr. Akinwumi Adesina, revealed that in the face of escalating global uncertainties and challenges confronting African economies, including energy transitions, good governance, accountability, climate change, debt sustainability, and most recently the COVID-19 pandemic, policy makers must make decisions with a clear understanding   of their potential impact on economic   growth and living standards.

He also stated that Africa’s capacity for macroeconomic modelling and forecasting, however, remains limited, adding that this critical capacity is essential for comprehending economic dynamics, policy planning and implementation.

Adesina remarked that many African countries required assistance to develop and implement models that reflect the social, political, cultural, and environmental realities of their respective nations.

Continuing, he added: “The African Development Institute initiated this project to gain a deeper understanding of Africa’s macroeconomic modelling landscape. Our objective is to have an inventory of models currently being used by countries, and gain a better understanding of their features and predictive capacities. We also aim to diagnose existing capacity needs in African institutions, focusing on government ministries (especially Finance, Planning, and Treasury), and Central Banks.”