According to Ajayi Nigeria is experiencing a revenue crisis that has triggered a debt crisis, IgbereTV reports
“If we do not generate enough revenue, we would have to borrow. Borrowing to fund recurrent expenditure instead of revenue-generating infrastructure will lead to a vicious circle where we keep borrowing,” he warned.
The International Monetary Fund (IMF) had predicted that Nigeria’s debt service-to-revenue ratio would jump to 92 percent in 2022 from 76 percent in 2021.
However, government revenue as a percentage of GDP has remained stuck at a paltry 6 percent, less than half of the frontier market average of 15 percent.
“From the standpoint of fiscal sustainability (solvency and liquidity), Nigeria is gradually approaching a fiscal cliff or trap as the country’s debt service to revenue climbs unchecked (currently at 119 percent of revenue) and debt-to-GDP ratio approaches the 35 percent weak-risk threshold set by the IMF (currently at 23.3 percent in Q1-2022),” the Nigerian Economic Summit Group said last month.
However, Ajayi said the country’s revenue crisis can be curtailed if government borrowings are used in building infrastructure that would generate more revenue to finance budget deficits, rather than borrowing to do so.
