Nonso Obikili, Director of Turgot Centre for Economic Policy and Research, has warned that except the President Muhammadu Buhari regime finds better and sustainable means of revenue generation, Nigeria might become highly indebted as it was in 1999.
Obikili, during an interview with CNBC Africa, said the country needed better tax reform to generate revenue for government expenditures instead of relying on loans.
“We are borrowing to pay salaries, which is not very efficient,” he said. “If you look at overall cost of servicing debt to revenue, we are not far from where we were in 1999.
“In 1999, we were considered officially an indebted country. If we don’t see big improvement on the revenue side, we could well be back to the highly indebted status of 1999.”
Rreacting to the $2.5 billion loan Nigeria approached the World Bank for, Obikili said although the conditions of any loan given by the bank would require the government to put the funds to good use, there was a need for the government to apply caution in seeking foreign loans.
He said: “The World Bank would insist that you have to spend this loan on construction activities, you cannot just spend them on fuel subsidies or salaries.
“The fundamentals are precarious but if there is a place we should be going to do deal with that then we are probably going to the right place.”
Advising the government on how best to avoid this looming debt bubble, Obikili said the government must stop fuel subsidy and reform the tax structure.