The Director-General of the Budget Office of the Federation, Ben Akabueze, has expressed concern that Nigeria is rapidly approaching its limited borrowing capacity. Speaking at the induction of newly-elected lawmakers of the 10th National Assembly in Abuja, Akabueze warned that the nation’s debt profile was becoming unsustainable.
He explained that the country’s debt service ratio is alarmingly high due to the fact that the revenue is too small to sustain the size of the debt. According to Akabueze, when a country’s debt service ratio exceeds 30 per cent, it is in trouble, and Nigeria is pushing towards 100 per cent, which indicates how much trouble the country is in.
Akabueze highlighted the fact that Nigeria has a very limited borrowing capacity not because the debt-to-Gross Domestic Product (GDP) ratio is high, but because the revenue is too small to sustain the size of the debt. He emphasized that Nigeria needs to spend about $100 billion annually to fix the infrastructural needs of the country, including private spending on infrastructure. However, the aggregate budget of the federal government is only about $30 billion, and the aggregate of the states and FCT budget don’t even add up to the federal budget.
In conclusion, Akabueze urged the government to pay attention to the country’s priorities when deciding which projects to invest in, as there is fierce competition for the limited resources available. He stressed that Nigeria needs to find a way to increase its revenue to be able to fund its infrastructure needs and reduce its debt service ratio.