In a decisive move to address Nigeria’s mounting reliance on borrowing for public expenditure, President Bola Tinubu has vowed to initiate comprehensive fiscal reforms. Speaking at the inauguration of the Presidential Committee on Fiscal Policy and Tax Reforms, President Tinubu emphasized the urgent need to enhance the nation’s revenue generation and minimize its dependency on external borrowing.
Escalating Public Debt Concerns
Nigeria has witnessed a staggering surge of 501 percent in total public debt over the span of eight years, soaring from N12.06 trillion in March 2015 to N72.55 trillion in March 2023. This substantial growth in debt has been propelled by increased borrowing, compounded by global economic downturns in 2016 and 2022, further exacerbated by the recent pandemic.
Data from the Debt Management Service (DMO) reveals that Nigeria’s total public debt comprises N19.64 trillion of foreign debt, N30.21 trillion of domestic debt, and N22.7 trillion of Central Bank of Nigeria (CBN) Ways and Means lending to the Federal Government.
Grave Debt Servicing Expenses
In 2022, the nation allocated a substantial N3.36 trillion to service debts, marking a notable 14.68 percent escalation from the N2.93 trillion expended in 2021. Notably, N1.07 trillion was directed towards servicing external debts, while N2.56 trillion was channeled to service domestic debts. The World Bank highlights the concerning statistic that Nigeria allocated a staggering 96.3 percent of its revenue to debt servicing in 2022, projecting a further rise to 103 percent in 2023.
Key Mandate of the Presidential Committee
The newly established Presidential Committee on Fiscal Policy and Tax Reforms, chaired by Taiwo Oyedele, a tax and fiscal policy expert, is poised to tackle critical issues related to tax law reform, fiscal policy coordination, tax harmonization, and revenue administration. The committee consists of experts from both the public and private sectors, reflecting a comprehensive approach to these pressing concerns.
President Tinubu’s Vision for Economic Transformation
In his address, President Tinubu highlighted his unwavering commitment to breaking the cycle of overreliance on borrowing and debt servicing. He emphasized the need to shift the focus from taxing poverty and production to prioritizing returns, income, and consumption. The President’s drive for economic growth and investment is reflected in the recent removal of fuel subsidies and the consolidation of the Central Bank’s exchange rate system.
Bold Objectives for Reform
President Tinubu articulated the committee’s objectives, including streamlining revenue collection agencies, reducing the cost of revenue administration, easing the burden of tax compliance on ordinary citizens, enhancing coordination between fiscal and economic policies, and promoting accountability in the utilization of tax revenues.
The committee’s mission is outlined with a one-year timeframe, during which it will deliver a comprehensive schedule of rapid reforms within the initial 30 days, propose critical reform measures within six months, and oversee full implementation within one calendar year. To ensure successful execution, President Tinubu directed all government agencies, ministries, and departments to provide full cooperation to the committee.
The establishment of the Presidential Committee on Fiscal Policy and Tax Reforms underscores President Tinubu’s commitment to sustainable economic growth, improved revenue generation, and reduced dependency on borrowing to finance public spending. The comprehensive reforms are expected to pave the way for a resilient and prosperous Nigerian economy in the years to come.