Please let us start by debunking certain myths in our country.
First, “Nigeria is an oil rich country.” False, because oil revenue per person per annum in Nigeria in 2013 when crude oil prices averaged over US$100 per barrel was US$520. In Qatar and Kuwait, it was US$31,000 and US$27,000 per person respectively. Those are the oil rich countries because there isn’t much that anyone can do with US$520 per person per annum.
Second, “Nigeria’s population is a strength.” False, population is only a strength if it is well educated, healthy, the economy has the capacity to provide them with employment and households have enough income to buy goods and services produced by businesses.
Thirdly, “Nigeria’s debt to GDP ratio is below 20%, one of the lowest in the
World. Therefore, we are not overleveraged and can continue to borrow to finance infrastructure spending.” Again, false, measuring the level of leverage as a percentage of national income is misleading for a country like Nigeria. This is because the presumption is that a large national income generates a large amount of tax revenues. This is untrue of Nigeria – we don’t pay taxes – therefore debt as a percent of revenue is a more meaningful ratio for us. By this measure, the local currency debts (LCY) of the Federal Government of Nigeria (FGN) is 325% of her revenues. According to Fitch, the ratings agency, the median for countries in Africa and the Middle East is 200%. Interest on loans is 50% of FGN revenues whereas Portugal, a country with a debt to national income ratio of 130%, uses only 11% of her revenues to pay interest on her loans. Of course, we are overleveraged!
Lastly, “Our problems cannot be solved.” Again, false! Of course, they can be solved – with sincerity of purpose and presence of mind. We all know the
challenges facing our economy therefore the purpose of this paper is to set out how we can return our country to the path of growth and prosperity.
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