Chief Executive Officer at BIC Consultancy Services, Dr Boniface Chizea, a leading economic and business development consultant, in this interview with Tony Chukwunyem, speaks on topical economic issues, such as Nigeria’s rising debt profile, rebased Gross Domestic Product (GDP) data and the new tax reform laws
The National Assembly’s recent approval of the President’s request for fresh external borrowings has sparked concerns about the sustainability of the nation’s debts. However, the govt argues that the proposed loans are already part of the MNEF and that there is no cause for alarm. Where do you stand on this issue?
Nigeria’s debt situation as it stands today is worrisome. The debt stock has ballooned that there is palpable fear that we might be headed rapidly to a situation of debt overhang which leaves the country in a sad and worrisome place as we become no longer attractive to obtain loans and even if we are able to do so, it will be at punitive rates of interest.
Our debt to the GDP ratio as set by the authorities is at 39.4% which is below the threshold of 40%. The total debt stock comprising both external and domestic was N 149.39 trillion as at March 31, 2025 which represents a year-on-year increase of N 27.72 trillion or 22.8% compared to the same period in 2024.
It has been observed that this administration in its two-year existence as borrowed more than the other administrations since the return to parliamentary democracy.
What is most worrisome with the debt situation is the lack of transparency. This situation is compounded with the hand in glove relationship between the Executive and the Legislature.
The Legislature seems to have surrendered its legislative functions of oversight on the Executive and therefore we have lost the benefit of having and independent and reliable facts on the matter. There is also no consistency whatsoever.
On some occasion you hear the legislators claim that the loan requests were all included in the Medium -Term Expenditure Framework and Fiscal Strategy Papers and in Budget 2025 but all that is hardly convincing as they don’t seem to speak with one voice and therefore not consistent.
The other matter is the worry that our leaders are so transactional in their approach. There must always be something in it for them.
And this observation couples with deep corruption makes it very difficult for the nation to obtain value for money from the loans it is taking.
We are therefore simply kicking the bucket down the road as we create mounting problems for future managers of the economy.
As we all know the politicians are consumed with the passion to win the next election and every thing they do is geared towards this objective. Therefore, what is happening with debt accumulation today is not the best for the country. It is bad news!
How would you react to the view in some quarters that the government should focus more on cutting costs rather than accumulating more loans?
Cutting costs is good housekeeping; particularly where the cost cutting is done objectively. But in our particular situation cost cutting is completely out of the question.
If anything what is worrisome is that costs in our environment are never competitive because of the influence of corruption which means that costs are padded to illegally accommodate parties involved. But cost cutting and taking of loans are not by any means mutually exclusive.
In fact, they never serve the same purpose as loan taking is for projects and cost cutting is good and prudent management. Cost cutting is never a substitute for the taking of loans as you are never going to able to save enough to allow you to undertake some projects.
What is your take on the rebased GDP figures recently released by the NBS?
The rebasing of the economy is what is done by most other economies, not only in Nigeria. The received wisdom in to undertake this exercise either ev
As we all know the politicians are consumed with the passion to win the next election and every thing they do is geared towards this objective
ery five or ten years when the environment is fairly stable and there are not too many disruptions.
It is an accepted practice which attempts to ensure that statistic produced is realistic, comparable and not far removed from reality and to capture structural shifts in the economy.
It also enables the undertaking of realistic comparisons with statistic produced be other countries. The last rebasing exercise was 11 years ago in the year 2014.
In most other jurisdictions rebasing the economy is done periodically as agreed by the authorities. But the worry is that if care is not taken and you don’t have a Statistician General of the Federation of stature who is respected, politicians could hijack the exercise to make the economy falsely upbeat as proof of their management prowess.
The recent rebased GDP calculation in Nigeria was meant to include illegal refineries or other hidden activities as well as digital economic activities, quarrying and other mining activities which were not captured in the past exercise.
As a result of this exercise the country’s GDP is now estimated at N 372.82 trillion. But in spite of this increased level of GDP Nigeria still remains fifth country in Africa after South Africa, Egypt, Algeria and Morocco.
But for a long time Nigeria was ranked the country with the largest economy in Africa.
Implementation of the new tax law is scheduled to begin in January next year. Are there any aspects of the law that you are particularly excited about, or not comfortable with?
The tax reforms exercise which have been acrimonious and contentious was aimed at improving the attractiveness of Nigeria as an investment destination by removing multiple taxation which negatively undermines the profitability of businesses and to provide job creation incentives so badly required during this time.
It provides simplified tax administration as it collapses other tax collection bodies into one body. The fact is that the other tax collecting centers are not too happy about this development for obvious reasons.
The tax reforms seek to provide relief to low income earners by exempting those earning less than one million naira annually from tax and stopping taxation on food, health care, education, electricity, public transportation and provides reliefs for SMEs and Micro businesses by increasing the threshold to qualify for the payment of tax from N 25 million to N 50 million.
It also provides incentives for remote work by making earnings from such endeavors tax exempt. It is good that a dedicated tax ombudsman and appeals mechanism was introduced.
It provides for digital filling of returns to facilitate compliance and the expectation is that these reform measures are expected boost tax revenue to result in an increase to the current ratio of tax to GDP ratio which stands at abysmal low rate of 10.8%.
There are indications that the new tax laws will require banks to demand Tax Identification Numbers (TIN) before allowing businesses to open accounts. Will this not affect financial inclusion?
It has been the practice for some time for most people to provide both Tax Identification Number as well as National Identity Number for most transactions.
For a long time now if you have any invoice to submit for payment for services rendered one is required to provide this data.
But it is true that if we are trying to deepen the banking sector by attracting more people to the banks and particularly those on the margin, in this respect, most of who are not educated who operate largely in the informal sectors of the economy, this requirement might pose on impediment.
We hope that some flexibility would be allowed as this stipulation is implemented so that the push for financial inclusion is not undermined.
What will you suggest the government should do to address the cost -of-living crisis which was worsened by the removal of fuel subsidy and the liberalization of the forex market?
The first thing the government needs to do is to push for some stability. It is an important requirement if businesses can operate confidently.
If businesses operate assuredly they are able to provide badly needed employment which must be the first step to the alleviation of poverty.
There will be the need to adopt pro poor policies such as ensuring the cost of education is affordable at least in government owned schools.
There will be the need for clinics where affordable medical care will be provided and there is urgent need to mitigate insurrection in the land so that farmers can return to their farms thereby improving farm productivity.
There is the need to reduce the inflationary pressure particularly food inflation through enhanced productivity.
There is no reason we can now not reduce further the price of pump fuel to impact transport costs. There has been a recommendation that the government should grant conditional cash transfers to the poor and marginalized.
But the challenge is how to find the resource for that. In the past we were able to that because we had resort to the printing of currency.
The present administration at the Central Bank has disavowed such practices and it has been commended by International Multilateral Agencies for such a positive stand and therefore it is unlikely that we would witness a sliding back in this respect.
High interest rates are used by the CBN to fight inflation. However, the tight monetary policy stance affects businesses. Do you agree that orthodox monetary policy is the most effective way of fighting inflation?
Unfortunately, the central bank does not have other weapons in its arsenal to fight inflation than pursuing a tight monetary policy which might not be the panacea particularly where the cause of inflation is not due to excess liquidity in the economy as is the case in Nigeria.
The cause of inflation in Nigeria is due to sudden hike in factor costs as attempts were made to remove fuel subsidy and float the exchange rate at the same time to make the rates market determined.
When that is the scenario, raising base interest rates might not be the solution. But because the Central Bank would want to attract dollars into the economy to boost dollar supply to stabilize the rate of exchange, there is an irresistible urge to keep interest rates high.
But we must always bear in mind that the interest rates are factor cost also which add considerably to the cost of doing business and therefore the rate of inflation.
What is really missing for now as we attempt to bring down the high rate of inflation is the fact that the fiscal authorities are pursuing expansive policies which run counter to the restrictive stance the monetary authorities have adopted.
For results to be achieved, both monetary and fiscal authorities must pull in the same direction.
Given the increase in FAAC allocations, occasioned by the devaluation of the naira, there is a lot of pressure on state governors to improve performance. Do you think this pressure is justified?
Yes. Because one of the complaints most people have is that the savings from subsidy removal and the naira that we receive from the depreciation in the rate of exchange should have been warehoused and not simply shared as is the case today.
Even though we must take on board the fact of the impact of inflation on the naira which is bound to undermine its purchasing power, there should have been certain visible impact to show for the increased quantum in naira flow to the governors.
But instead, most of the governors are also involved in the craze to borrow for projects some of which is routinely misapplied. This situation is worsened and promoted because legislative oversight across board is observed in the breach.
How do you see plans by the African Union to set up a credit rating agency for the continent to counter negative reports by Fitch, S&P and Moody’s? Why do we look for favorable credit ratings? Is it not to assist us in our dealings with the international community? If you set up your own credit rating agency and they refuse to recognize such ratings, what then is the value?
I refuse to accept that the rating agencies would deliberately want to make African countries look bad. They do not have any particular interest to do so.
We should work with them to seek their cooperation to assist us work to upgrade our ratings through measurable improvements in our situation.
Setting up local rating agencies is not something, in any case that will happen tomorrow. It will be drawn out and be a long haul. But meanwhile we have to get by today.
There is nothing wrong in growing such capacity amongst us because no one expects the narrative to remain the same forever. But the point to make is that we should go into dialogue with the rating agencies to have a meeting of mind in the interest of all concerned.
𝗙𝗼𝗹𝗹𝗼𝘄 𝗢𝘂𝗿 𝗪𝗵𝗮𝘁𝘀𝗔𝗽𝗽 𝗖𝗵𝗮𝗻𝗻𝗲𝗹 𝗧𝗼 𝗚𝗲𝘁 𝗟𝗮𝘁𝗲𝘀𝘁 𝗡𝗲𝘄𝘀 𝗔𝘀 𝗜𝘁'𝘀 𝗗𝗿𝗼𝗽!
