Tinubu Aims To Break Nigeria’s Debt Reliance; Forms Fiscal Reform Panel

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Promising to put an end to Nigeria’s heavy reliance on borrowing for public expenditure, President Bola Tinubu unveiled his commitment during the inauguration of a special committee on fiscal policy and tax reform. Nigeria’s public debt surged by an alarming 501% over eight years to reach N72.55 trillion by March 2023, up from N12.06 trillion in 2015. This upward trend, driven by increased borrowing, was as a result of global economic downturns and the pandemic.

The Debt Management Service disclosed that the N75 trillion public debt consisted of N19.64 trillion in foreign debt, N30.21 trillion in domestic debt, and N22.7 trillion lent to the government by the Central Bank of Nigeria. In 2022, the country expended N3.36 trillion on debt servicing, a 14.68% rise from the previous year.

The World Bank warned that Nigeria’s debt servicing burden could increase to 103% of revenue by 2023. Addressing these challenges, the Presidential Committee on Fiscal Policy and Tax Reforms, led by Taiwo Oyedele, aims to harmonize taxes, enhance revenue administration, and design cost-effective solutions.

Tinubu underscored the need for change, shifting focus from taxing poverty and production to revenue, income, and consumption. The President emphasized that a revamped tax system was crucial to unlocking investment and economic growth potential, while steering Nigeria toward sustainable development and a minimum 18% Tax-to-GDP ratio within three years.

The removal of fuel subsidies has already moved Nigeria’s revenue-to-GDP ratio by around 2%. The World Bank’s Country Director for Nigeria, Shubham Chaudhuri, highlighted the potential for growth in this area, noting that comparable middle-income countries allocate 15-20% of GDP to subsidies.

 

 

 

 

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