The World Bank has blamed over dependence on crude oil as the bane for Nigeria’s low revenue status. The global financial institution noted that this is the reason why the country’s revenue to gross domestic product, GDP ratio is the lowest in the world, adding that this has hampered the provision of critical infrastructure.
Last week, the Brenton Wood USA based bank said it was worried that over 70 per cent of the revenue is being used to service debt. The breakdown of 2020 budget indicate that the federal government spent N310 trillion out of the N3.48 trillion, representing over 70 per cent on debt servicing for the year.
The situation has led to paucity of funds on the part of the government to fund critical infrastructure such as education, public transport, health etc, analysts say, noting that the government has been forced to incur local and foreign dent in other to bridge the gap. The Buhari administration has pushed the nation’s debt to over N30 trillion since it came to power in 2015.
Speaking during a panel session at a virtual public sector seminar organised by the Lagos Business School, LBS the, World Bank’s country director for Nigeria, Shubham Chaudhuri emphasized the urgent need to diversify the economy.
The minister of Finance, Budget and National Planning, Zainab Ahmed also disclosed at the occasion that the government is very worried that critical infrastructure could not be provided due to lack of funds.
The webinar was themed ‘Nigeria in Challenging Times; Imperatives for a Cohesive National Development Agenda’
Chaudhuri said “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.
“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 said the federal government needs more revenue to provide basic social services, such as education, primary healthcare, nutrition, among others.
According to him “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 said government’s policies are emasculating the growth of the private sector. According to him “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,” the World Bank’s chief said.
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