Barely 48 hours after finance minister, Kemi Adeosun, said the federal government must move away from debt in funding future budgets, she clarified her statement saying Nigeria has no choice but to continue to borrow in order to fund the 2O17 budget.
A statement signed by the finance ministry on Thursday said the country needs aid to implement the Federal Government’s Economic Recovery and Growth Plan, ERGP.
Nigeria, which is Africa’s largest economy, is in its first recession in 25 years.
It had planned to borrow extensively from overseas to fund a record budget aimed at helping the country spend its way out of its economic doldrums.
So, when the Finance Minister said the country “cannot borrow anymore” while speaking at the quarterly presidential business forum in Abuja, she left so many people puzzled.
Adeosun’s comments raised questions about how Nigeria would fund its budget for the year and about planned foreign loans of $2 billion from lenders like the World Bank.
“We have headroom to borrow and are doing so aggressively in the short to medium term in order to address our infrastructure deficit and to stimulate growth,” Thursday’s statement from the Ministry clarified.
“At the same time, it is vital that Nigeria diversifies its revenue base and builds its revenue profile,” it said. That would “ensure that we do not continue to overly rely on debt to fund our budget spending over the long term.”
To reduce the need for debt, the finance ministry is trying to increase Nigeria’s tax collection revenues. It hopes to raise at least $1 billion from a scheme that will give tax evaders a chance to make payments retroactively.
Economists have long criticised the low levels of tax in Nigeria, and in March the Abuja government laid out plans to increase the overall of tax to gross domestic product to 15 percent by 2020 from 6 percent now.
Nigeria’s presidency signed off on its 7.44 trillion naira ($24.39 billion) budget for 2017 in June, after numerous delays.
The plan projects a deficit of 2.21 trillion naira, implying a deficit equivalent to 2.18 percent of Nigerian GDP.
The Economic Recovery and Growth Plan provides for an increase in spending over a three-year period, which is reflected in the 2017 budget.