- Says Nigeria now earns revenue to service debt not to grow
- Says country’s cost of governance too high, calls for reduction
- Says it take Nigeria 300 years to bridge infrastructure gap
From Juliana Taiwo-Obalonye, Abuja
The President of African Development, Adewumi Adesina, has urged Nigeria’s President-elect, Bola Tinubu to rise to the challenge of governance on his first day in office as the country needs leadership that will reassure it with the hope of security, peace, and stability.
Speaking on the topic, “Strengthening Nigeria’s Economy”, Adesina added that Nigeria needs to be healed and unites a fractious nation that will arise above party lines and forge a united nation with inclusiveness, fairness, equity, and justice.
On the other hand, the AfDB President noted that the new administration must prioritise macroeconomic and fiscal stability as imperative, insisting that the incoming administration must act as a matter of urgency.
“Unless the economy is revived and fiscal challenges addressed boldly, resources to develop will not be there. No bird can fly if its wings are tied. Nigeria currently faces huge fiscal deficits, estimated at 6% of GDP. This has been due to huge federal and state government expenditures, lower receipts due to dwindling revenues from the export of crude oil, vandalism of pipelines and illegal bunkering of crude oil,” he said.
Adesina noted that data from Nigeria’s Debt Management Office, indicates that “Nigeria now spends 96% of its revenue servicing debt, with the debt-to-revenue ratio rising from 83.2 per cent in 2021 to 96.3 per cent by 2022.
“Some will argue that the debt to GDP ratio at 34% is still low compared to other countries in Africa, which is correct; but no one pays their debt using GDP. Debt is paid using revenue, and Nigeria’s revenues have been declining. Nigeria earns revenue now to service debt not to grow.”
The AfDB President further argued that for Nigeria’s incoming administration to move the economy ahead it needs to make bold decisions to end the inefficient fuel subsidies.
“The place to start is to remove the inefficient fuel subsidies. Nigeria’s fuel subsidies benefit the rich, not the poor, fueling theirs and the government’s endless fleets of cars at the expense of the poor. Estimates show that the poorest 40% of the population consume just 3% of petrol.
“Fuel subsidies are killing the Nigerian economy, costing Nigeria $10 billion alone in 2022. That means Nigeria is borrowing what it does not have to… if it simply eliminates the subsidies and uses the resources well for its national development,” he quipped.
He maintained that instead of the current policy of doling out monies for fuel subsidies, funding, and support towards establishing private refineries and modular refineries will lead to efficiency and improved services.
“Rather, support should be given to private sector refineries and modular refineries to allow for efficiency and competitiveness to drive down fuel pump prices. The newly commissioned Dangote Refinery by President Buhari, the largest single-train petroleum refinery in the world, as well as its petrochemical complex, will revolutionise Nigeria’s economy. Congratulation, Aliko Dangote for his amazing $19 billion investment,” the AfDB president said.
Adesina advised the incoming administration on cutting down on the cost of governance, canvassing that the bloated size of government comes with the high cost of public sector expenditure and its negative impact on the development process in the country.
“The cost of governance in Nigeria is way too high and should be drastically reduced to free up more resources for development. Nigeria is spending very little on development.
Today, Nigeria is ranked among countries with the lowest human development index in the world, with a rank of 167 among 174 countries globally, according to the World Bank 2022 Public Expenditure Review report.”
“To meet Nigeria’s massive infrastructure needs, according to the report, will require $3 trillion by 2050. According to the report, at the current rate, it would take Nigeria 300 years to provide its minimum level of infrastructure needed for development.
All living Nigerians today, and many generations to come, will be long gone by then!
We must change this. Nigeria must rely more on the private sector for infrastructure development, to reduce fiscal burdens on the government.”
He advised the incoming Tinubu administration to pay attention to tax revenue, as the tax-to-GDP ratio is still low, adding that improving revenue collection will help in improving Nigeria’s economy, but this needs to be implemented with tact, adding that it may require additional tax burden on citizens but rather ensure efficient revenue collection from multi-national companies, ensuring that they pay appropriate royalties and taxes and close leakages, and tax exemptions.
Adesina provided a pragmatic policy advisory to the incoming administration on how to navigate through taxation and its impact on Nigerians whom he argued are virtually providing essential services to themselves including water, power, roads, etc., which are the responsibilities of government.
“This must include improving tax collection, tax administration, moving from tax exemption to tax redemption, ensuring that multinational companies pay appropriate royalties and taxes and that leakages in tax collection are closed. However, simply raising taxes is not enough, as many question the value of paying taxes, hence the high level of tax avoidance. Many citizens provide their own electricity, sink boreholes to get access to water, and repair roads in their towns and neighbourhoods,” he noted.
“These are essentially high implicit taxes. Nigerians, therefore, pay the highest ‘implicit tax rates’ in the world. Governments need to assure effective social contracts by delivering quality public services. It is not the amount collected, it is how it is spent, and what is delivered. Nations that grow better run effective governments that assure social contracts with their citizens.”