Nigeria’s Budget Office has raised an alarm regarding the impending revenue problem which it says is about to cripple the country if nothing was done to arrest the trend.
The Director of the Budget office in the Ministry of Budget and National Planning, Ben Akabueze, raised the alarm on Wednesday saying Nigeria was in serious revenue crisis.
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The Director made his point by illustrating that the subsidy being currently carried out by the Nigerian National Petroleum Corporation (NNPC) was not sustainable and was harming Nigeria’s overall revenue stream.
According to the Budget office Director, the NNPC was subsidising every litre of petrol, consumed in the country by N53, referring to the monies being paid out as under-recovery instead of subsidy.
Mr. Akabueze made these revelations while answering questions from participants at the Strategic Dialogues on the Morocco-Nigeria Relations in Abuja. He said;
“For us in Nigeria, lately there has been a lot of talk about government’s borrowings and those who talk about it are justified to express the concern. But the truth is that I think we are generally having the wrong discussion. I personally don’t think we have a debt problem, but we have a serious revenue problem, which, if we do not address, will snowball into a debt problem.
But instead of having a discussion around the revenue issue, we are talking about the debt. Morocco, for instance, has a 63 per cent debt to GDP ratio; we have a 20 per cent debt to GDP ratio. Morocco has over 3.4 per cent deficit to the GDP ratio; we have a statutory cap of three per cent.
The real issue is that in 2017, for instance, our debt service to revenue ratio crossed 60 per cent. There are two options of a policy standpoint in trying to address the numerator, which is debt, at a time when you have huge infrastructure deficit that needs to be addressed.
And this is also at a time when the economy remains pretty fragile and, therefore, government spending is critical to sustain and drive growth. Therefore, focusing on the numerator in times like this may not be the solution. This is why revenue is what we need to focus on.”
Akabueze further revealed that although the price of crude has increased, the increase has had no effect on Nigeria’s oil revenue because the country spends more to import all the refined products from crude oil into the country.
“On oil price, for us it is a double-edged sword unfortunately. This ought to be a season where we should be clicking glasses with regards to the oil price. But right now, practically every drop of refined petroleum product that we consume in the country is imported.
And the one single factor that determines the price of refined product is the price of crude. In essence, while we export the crude at about $80 (per barrel), we effectively import back the same crude at about $100 importation price for refined products. And that explains why despite the strong oil prices, we are not seeing a corresponding growth in government revenue.” He said.
Speaking on the amount being spent by the NNPC in subsidizing petrol in the country, despite repeated denials by the political leadership, Akabueze stated that the huge financial burden had severely dragged down the country’s revenue.
“Also at the moment, in terms of pricing of petroleum products, for every litre of petrol, there is a N53 under-recovery. Well, that is the term that the NNPC, which has this responsibility, calls it and so who am I? This represents a significant value for us. Hence, the need to diversify the economy remains urgent,” he concluded