DMO: FG needs to address issues around petrol subsidy to reduce borrowings

The Debt Management Office (DMO) has urged the federal government to take steps to address issues around petroleum subsidy payment to further reduce borrowings.

Patience Oniha, director-general, DMO, said this in an interview with NAN on Wednesday in Abuja.

Oniha said there was a need to focus on generating revenue, adding that the country’s income is low compared to some other countries.

According to her, a strong and comparable revenue base will reduce the need for relatively large amounts of new borrowing as Nigeria has witnessed, and will also reduce the debt service to revenue ratio.

“How much revenue is Nigeria generating? Statistics show that relative to other countries, Nigeria’s revenue is low,” she said.

“The World Bank’s World Economic Outlook for 2020 showed that Nigeria with revenue to GDP ratio of 6.3 percent was ranked at 194 out of 196 countries covered.

“The DMO has repeatedly emphasised the need to grow revenues significantly in order for a debt to be sustainable.

“It is advisable for the media and public analysts to begin to focus attention on Nigeria’s revenue generation.

“Revenue is the way to go and that is how countries develop and use borrowing to augment revenue shortfalls now and again.

“Nigeria has been running budget deficits for decades; it is about time to shift to balanced budgets and even surplus budgets.”

Oniha also advised the government to ramp up crude oil production and end crude oil theft and pipeline vandalism to meet oil revenue targets.

“The DMO has continuously maintained its position on the need to raise revenue,” she said 

“One issue to be addressed is the petrol subsidy which has significantly increased annual budget deficits and ultimately, increased the level of new borrowings and the public debt stock.

“There is a vital need to ramp up crude oil production and end crude oil theft and pipeline vandalism to meet oil revenue targets, especially in the light of rising crude oil prices.

“Other structural issues such as insecurity, inflation, infrastructural deficit and foreign exchange shortages adversely affecting the business environment need to be resolved.”

Oniha noted that taking such steps in curbing the situation would create an avenue for efficient tax collection and a wider tax base.

In June, the DMO said Nigeria’s total public debt rose to N41.6 trillion at the end of the first quarter (Q1) of 2022, representing an increase of N2.04 trillion compared to the N39.56 trillion recorded at the end of December 2021.

According to Oniha, Nigerians are criticising the agency over debt management, but they do not understand the legislations and regulations governing borrowing and public debt.

She added that the public needs to be familiar with the provisions in the DMO establishment act, 2003, and the fiscal responsibility act, 2007.

“Public debt has grown over the last years as the government borrowed to meet major revenue shortfalls, increased spending on security and infrastructure, as well as funding on health due to the COVID-19 pandemic,” Oniha explained.

“The levels of new borrowing to meet these needs are often captured in the annual appropriation acts and medium-term external borrowing plan (MTEBP).

“Although it looks obvious, one of the things omitted in the analyses by experts is that new borrowing will automatically translate to higher debt stock and debt service levels.” 

Recently, the cost of debt servicing surpassed the federal government’s retained revenue by N310 billion in the first four months of 2022.