Minister of State for Budget and National Planning, Mr Clem Agba, has allayed fears that President Muhammadu Buhari led administration was plunging the nation into debt problem by borrowing a lot.
Speaking with newsmen at Nigerian Institute for Social and Economic Research (NISER) Ibadan, Agba said the nation was borrowing to fill the yawning infrastructure gap, expanded over the years, rather than for consumption.
Noting that the nation’s population grew at an average rate of 3.2 per cent, he said the nation had to borrow to build infrastructure now to cater for the nation’s booming population rather than wait for the future years when it will be more expensive.
Describing the nation’s Gross Domestic Product (GDP) to debt ratio was non-threatening, Agba said the major challenge facing the nation was shoring up its revenue.
According to Agba, the current investment in infrastructure will be self-paying and not money just going down the drain.
Agba, however, pointed out that the Federal Government was more concerned about population going higher than the GDP, though he noted that the nation had continued to have sustainable economic growth since it exited recession.
“I don’t toe that line that the government is borrowing too much. Even as an individual, you have to go out to borrow in order for you to grow. What is bad is when you borrow for consumption.
“What we are doing now is borrowing for infrastructure that will be self-paying. We made so much money in the past; we did not invest it in infrastructure so there is infrastructure deficit everywhere.
“Our population is growing at an average of 3.2 per cent and with that population growth, there is a need for more infrastructure and the only way to catch up with it is to borrow.
“We have a revenue problem but we don’t have a debt problem because when you look at our debt to GDP, we are still very fine.
“We are borrowing for rail. The rail system has not worked in this country for over 40 to 50 years but they are beginning to work. And as cargo goes through those rails, we are going to make money to pay back the loans.
“So, it is important that these infrastructures are built now and that we borrow now to do it otherwise it will be more expensive if it is to be done later. If we are borrowing to consume, then there should be that fear.
“We went through five consecutive quarters of recession and we have come out of it. Now, we have had about 11 consecutive quarters of positive growth.
“The only issue is that of population growth and that requires a lot of education because if people are enlightened, they will know that they do not need to have 12 wives.
“If you have 12 wives, every wife will want to have a child and they are contributing to the population growth. You want your GDP growth to be higher than your population growth, that is why there is some form of concern.
“But, the assurance Nigerians should have is that the growth that we have had is sustainable. It is not that we have positive growth this quarter and negative growth the next quarter. Consistently, we have had GDP growth which is a good sign,” Agba said.
Asked if the federal government was not stifling Nigerians to shore up its revenue like the recently implemented 7.5 per cent Value Added Tax (VAT), Agba argued that governments all over the world lived on taxes hence Nigeria could not be an exception.
He described the VAT paid in Nigeria as among the least in the world and was virtually consumption tax.
For the government to deliver socio-economic development, provide infrastructure and good living environment, Agba stated that tax had to serve as a major source of the needed income.
“These Nigerians you say we are stressing go to South Africa and pay VAT of 15 per cent, they go to Ghana and pay VAT of 12.5 per cent. But Nigeria having the lowest VAT in Africa is stress yet we need infrastructure, minimum wage.
“Governments all over the world live on taxes and those who earn revenue are to pay taxes either as individuals or companies. To ensure that Nigerians are not stressed, the basic necessities of life that Nigerians require are not VATable.
“For example, if you go to the market and buy yam, you will not pay VAT. If you were to go to a pharmacy to buy medication, you will not pay tax; if you were to buy books, you will not pay VAT.
“But if you decide to go to Sheraton hotel or Transcorp to eat, you will pay VAT. If you decide to fly, you will pay VAT, so it is almost like a consumption tax.
“Basically, sources of income to the government over the world are from taxation; that is why the developed countries are doing well. They have very high taxes and that is the only way you can sustain infrastructural development,” Agba said.