- Ben Akabueze said that while Nigeria remains healthy with its debt-to-GDP ratio, the country is not healthy with its debt-to-income ratio as it is low.
- He noted that Nigeria’s expenditure-to-GDP ratio is too low, at 15%, compared to some major African countries.
- Akabueze at the induction ceremony also stated that Nigeria should not be classified as an oil-rich economy.
Federation Director General Ben Akabueze has sounded the alarm that Nigeria is rapidly outgrowing its limited borrowing space due to its low debt-to-income ratio, warning of trouble ahead.
This was made known by Akabueze while addressing the elected members of the Tenth National Assembly at their week-long induction ceremony on Wednesday, at the International Conference Centre, Abuja, where he noted that Nigeria’s debt profile is becoming untenable.
The head of the Bureau of Budget noted that while Nigeria remains healthy with its debt-to-GDP ratio, the country is not healthy with its debt-to-income ratio.
Akabueze addressed newly elected and returning members of the National Assembly, which is responsible for the consideration, amendment and approval of the Federal Government’s annual budgets, as well as economic bills such as the Finance Bill.
Nigeria’s spending to GDP ratio is too low at 15%
- Akabueze said:You may have heard that we have one of the lowest gross domestic product to debt ratios in the world. While the size of the FG budget for 2023 created some excitement, the aggregate budget of all the governments in the country amounts to around N30tn. That’s less than 15 percent in relation to GDP terms.
- “Even on the African continent, the spending ratio is around 20 percent. South Africa is around 30 percent; Morocco is around 40 percent. And at 15 percent, that’s too little for our needs. That is why there is fierce competition for limited resources.
- “That can determine how much we can borrow relatively. We now have very limited lending space; not because our debt to GDP is high, but because our income is too small to sustain the size of our debt. That explains our high debt service ratio. Once a country’s debt service rate is above 30%, that country is in trouble and we’re moving toward 100%, and that tells you how much trouble we’re in.
- “We have limited space to borrow. When you consider how much you can generate in terms of income and what you can reasonably borrow, that establishes the size of the budget. The next thing would be to pay attention to the priority of the government regarding which project gets what.”
Nigeria is not an oil-rich economy
Akabueze at the induction ceremony also stated that Nigeria should not be classified as an oil-rich economy.
- He said, “We are not even an oil-rich economy. To classify oil-rich economies, you talk about countries like Saudi Arabia, where there are 34 million and pumping 10 million barrels of crude per day, or Kuwait, where there are 3 million and pumping 3 million barrels per day.”
The head of the Bureau of Budget added that while Nigeria has a population of over 200 million, the country currently pumps around 1.9 million barrels per day.
- He is stressed, “So we are not a rich economy and we must resist the temptation that we are an oil rich economy. Let me clarify that we are potentially rich countries, but we are not.”