By Lydia Ngwakwe
Economic analysts on Monday called on the Federal Government to reduce the high cost of governance, to enable it pay up its growing debts when interest rates were due.
They made the call in separate interviews with the News Agency of Nigeria (NAN) in Lagos, on the backdrop of Nigeria’s growing public debt portfolio.
They said except a drastic cut in cost of governance was implemented, tougher times might be ahead for the economy.
Director, Centre for Economic Policy Analysis and Research (CEPAR), Prof. Ndubisi Nwokoma, said that the problem of a growing public debt portfolio, dwindling revenue and increasing debt service, payments had been an albatross to many African countries.
“With a rising cost of borrowing (increased interest rates), debt service payments situation will worsen.
“Currently for Nigeria, the debt service to revenue ratio is grossly unsustainable, at a level of about 60 per cent.
“Except revenues increase or a drastic cut in cost of governance is implemented, tougher times may be ahead for the economy,” he said.
In the same vein, Prof. Sheriffdeen Tella, a Professor of Economics at the Olabisi Onabanjo University Ago-Iwoye, Ogun State, urged government at all levels to define critical spending.
The professor urged the government to also rank them in order of priority, given the revenue constraint the country was facing now.
“More importantly, the States and the Federal government need to look into wealth creation rather than loan acquisition.
“Expenditure on political administration should be reviewed downward; Ghana also run Presidential form of democracy and there is no complaint that it is too expensive.
“This means we make our own expensive and the need to revisit expenditure profile is now,” Tella said.
Prof. Akpan Ekpo, Professor of Economics and Public Policy, University of Uyo, said that Nigeria economy was still borrowing both domestic and external despite rising debt servicing; which the country was only servicing the debt.
He said that in the United States for instance, a country used as a benchmark for judging the associated risk in borrowing for all countries, rates have started rising.
Ekpo said that the rising rates meant that the Nigerian economy would pay more for its debt when they were due.
He said that the ratio between domestic and external borrowing was 70:30; for external debt, depending on the creditor, adding that an economy could reschedule if unable to pay unlike domestic borrowing.
He said that for the country not to be in trouble, the economy must be productive, reduce dependence on oil revenue since it is an exogenous source of revenue and strive to mobilize domestic resources.
“However, for now, it is a big challenge given the health pandemic, sluggish and fragile growth of the economy.
“The way out is to borrow to finance capital projects (hard infrastructure) if necessary; seek funds from multilateral institutions with concessionary rates and be transparent.
“Furthermore, government should examine its expenditure profile and see where to undertake expenditure switching and reduce the high cost of governance,’’ Ekpo said.
According to a most current data released by Nigeria’s Debt Management Office in December 2020, the country’s public debt owe China is N32.9 trillion.
This comprises N12.7 trillion in external debt, N20.2 trillion in domestic debt, including loans by bank.
Of this amount, the Federal Government owed N16 trillion while the balance was loans by the state government and the Federal Capital Territory. (NAN)