With respect to our debt problem I am expecting the 2020 budget to address it. One of the ways to do that should be to organize a national debt emergency policy summit. This should involve all the public and private stakeholders from federal to states.
Having said that, let me remind us once again that Nigeria’s problem is not that its national debt is excessive. After all among peer economies we are the least borrowed especially in GDP ratio. In fact, from debt to GDP and especially external to domestic debt ratio we are an under borrowed economy.
Having said that, Nigeria’s debt problem is dangerous. It is not only because we have been borrowing at such high cost to revenue (i.e. like a company borrowing at higher rate than profit). It is dangerous because having been borrowing for consumption rather than for growth-driven project investments, we do not generate any revenue from consumption to service the debt let alone for repaying the loan. That is what is making our debts bad and dangerous especially in the sense that these debts cannot be serviced without our further borrowing.
So, two things need to happen quickly in our debt economy if we want to get out of our present high debt service obligations and low capital budget spending.
First, we must reduce our high cost of running government. The law must insist on minimum of 50% capital spending or else such a budget should not be passed by lawmakers. Besides all budget spending should be fully in public domain with all the details
Can we imagine the case of bringing to an end the current jamboree public servants are used to enjoying, including free cars, at the expense of growing the social side of the economy? This and other wastages should stop if we want to reduce the current high cost of running government which is the cause of our recurrent deficits driven and borrowing.
Second, we must begin to migrate from our present outdated manual tax collection and remittance to what is now the best practice, which is electronic tax collection and remittance. Using electronic VAT collection and remittance, for example, will increase the country’s current VAT receipts by as high as more than 500%.
Besides, our VAT rate should not be less than 10%. This is because we have the lowest VAT rate among peer economies. Take South Africa. Because South Africa has its VAT at 15% in 2018 it generated a whopping $25 billion from VAT alone against Nigeria’s N1.1trillion ($3.2billion) even though South Africa’s economy is smaller than Nigeria’s.
With VAT increased to at least 10% and with electronic VAT introduced, no doubt, more VAT receipts will mean more money going into public treasury which should be made to go straight into essential economic development projects and social security programs.
If we want to invest wisely and for a healthy and productive citizens we should make sure that such programs should include rural water, public healthcare, public schools, and public transportations.
But to make all these possible and truly dynamic, we need to drastically reduce the current federal overbearing influence on the economy. Let states be more actively involved in their daily economic decisions; and let regional economies emerge to reinforce state economies.
This should be the only arrangement that will trigger the kind of speedy economic growth we badly need to reduce our high level of unemployment and grow social prosperity through social inclusive programs and projects.