By E Njega
Nigeria’s debt to GDP ratio is around 22% but the country is already in a serious debt crisis with over 50% of revenues going into debt servicing.
This hype about debt to GDP ratio is reckless nonsense. We are in serious trouble if the man in charge of the country thinks this way.
Currently we are spending over 30% of revenues on debt servicing. This is beyond recommended limits.
Any little shock on the economy such as drought or currency depreciation will see all indicators blinking red in a very short time span.
This business of borrowing to maximum capacity has exposed us to serious risks. You haven’t heard the last on this issue.
Again I will fault Kenyan journalists for being shallow and lacking seriousness in their work. Uhuru gave the same answer on borrowing as he gave to Richard Quest a few weeks back. They should have prepared for this.
He claims that the debt has been well spent. The debt has almost tripled under his incompetent reign from KShs 1.8 trillion to KShs 5.2 trillion.
That means government revenues should also have nearly tripled to KShs 2.4 trillion which would make the debt sustainable and a non-issue. Revenues haven’t even doubled under Jubilee hence debt sustainability questions.
Forget about that nonsense of infrastructure spending taking long to bear fruits. Kibaki tripled debt and more than tripled revenues in ten years.
The journalists should have informed him that debt is paid using cash/revenues not using GDP.
Journalists should use facts when tackling economic issues.
Even the small rise in government revenues has been through increase in taxation rather than as a result of prudent debt investment.
Maina Wa Muchiri adds: “The right measure should always be debt to revenue ratio because the govt pays debts from tax and other revenue and not from the GDP. While a rising GDP means a rising revenue, the taxation level also comes into play meaning 2 countries with the same GDP could have extremely different tax revenue. So measuring debt against revenue gives a true picture of the problem”
Samuel Kairu says – “The funny thing is Nigeria has a GDP five times that of Kenya but a lower budget 27bn Vs Kenya 29bn USD. Compare and contrast that with South Africa annual budget of 103bn USD. The claim that Nigeria economy is larger than South Africa is just work of fiction”
Ekakoro Emm concludes- “I think we gave him this defense ourselves when we began citing that blasted ratio as an indicator that our debt was getting sustainable. So all he needed to do was say that other countries have worse ratios but are doing fine. Alternatively, if we refuse to buy that argument, he’ll rebase the GDP and show that the ratio is still in the clear. Either way, we can’t win. Only bankruptcy will win over us”
