Shubham Chaudhuri, the bank’s country director for Nigeria, said this on Monday during a panel session at a virtual public sector seminar organised by the Lagos Business School (LBS).
The webinar was themed ‘Nigeria in Challenging Times; Imperatives for a Cohesive National Development Agenda’.
Last year, the federal government spent N3.10 trillion on debt servicing for the 11 months (January- November) 2020, out of N3.48 trillion retained revenue for the same period.
This represented 89 percent of its revenue.
In its 2022-2024 medium-term expenditure framework and fiscal strategy paper (MTEF & FSP), the budget office of the federation also projected to spend N48 out of every N100 revenue to repay debt in the next four years.
According to Chaudhuri, Nigeria’s basic economic agenda is about diversification away from oil because oil has been like a resource curse for the country in multiple dimensions.
“Nigeria is a country with tremendous potential. If you look at the synopsis for this panel, it suggests that Nigeria is at a critical juncture – almost at the moment of crisis,” Chaudhuri said.
“Despite all of that, Nigeria is still the largest economy in Africa. So, just think about the potential that Nigeria has because of its natural resources, but more than that, because of its dynamism and all of its population. Nigerians are more entrepreneurial by nature.
“No country has become prosperous and realised its potential, eliminated poverty without doing two simple things: investing in its people, and unleashing the power of the private sector in creating jobs by investing and growing business. And then, of course, the basic function of the state is to provide security and law and order.”
He explained that investing in people entails provision of basic services, basic education, primary healthcare, nutrition, among others.
“On this, Nigeria at the moment ranks sixth from the bottom in terms of the human capital index that we produce every year,” he added.
“So, obviously, there is a huge agenda in terms of investing in human capital. Nigeria spends more on premium motor spirit ( PMS) subsidy than it does on primary healthcare in a year, and we know who the PMS subsidy is benefitting.”
The country director noted that despite the country’s huge potential to attract private capital, the non-oil sector is not growing robustly – and not generating enough revenues to cater for the government’s needs.
He emphasised the need for private investment for the country to realise its potential, but added that the private sector in the country “is struggling to breathe”.
“So, we see as priorities investments in human capital. But for that, one needs revenues. And there again, Nigeria, unfortunately, has the distinction of having about the lowest revenue-to-GDP ratio in the world,” Chaudhuri said.
“The standard rule of thumb is that for the government to provide the basic services and law and order, it needs between 15 to 20 percent of GDP as being revenue, and this will be both at the federal and state levels combined.
“In Nigeria, it was eight percent in 2019. In 2020, in the middle of the COVID-19 crisis and with the fall in oil prices, that went down to about between five and six percent.
“So, domestic revenue mobilisation is huge. And then the third is enabling the space for private investment. You have to fix the power problem. Power is like the oxygen of an economy. In Nigeria, the private sector is struggling to breathe.”
Speaking at the event, Zainab Ahmed, minister of finance, budget and national planning, described the country’s revenue situation as very weak.
She said the government is concerned about the issues of insecurity, poverty and unemployment in the country.
“But there is also one issue, and that is the lack of revenue to be able to do as much as we want. But maybe we would be able to do if we all realise that the revenue situation in the economy is very weak. It is fragile,” Ahmed explained.
“Whatever we can get, maybe there is a way we can come together to make sure that we are able to reprioritise what we spend this money so that we can then meet our national priorities.”
