…Warns against Nigeria’s looming debt crisis
…Worries about Nigeria’s capacity to service high debt
The Lagos Chamber of Commerce and Industry has decried Nigeria’s debt profile, stating that the fresh $29.960bn loan request by President Muhammadu Buhari is troubling and could lead to a full-blown debt crisis.
President Muhammadu Buhari had on Thursday, re-sent the $29.96billion 2016-2018 external borrowing plan to the Senate for its consideration and approval.
The request which was earlier sent to the senate led by Senator Bukola Saraki and Yakubu Dogara, in 2016 was rejected.
Due to this development, the LCCI has expressed concerns over the growing national debt, which stood at N25.7 trillion as at the second quarter of 2019, compared to N12.6 trillion it stood in 2015.
The LCCI is also worried about the nation’s capacity to service the debt, as the debt grew by 104 per cent in two years.
Commenting on this development, Director-General of LCCI, Muda Yusuf, at the weekend, asked that the appropriate policy choices should be introduced to attract domestic and foreign private-sector capital for infrastructure financing.
“For instance, the debt service provision in the 2019 budget was a whooping N2 trillion; whereas the total capital budget was N2.9 trillion; this implies that the debt service commitment was 70 per cent of capital budget allocation.
“In the 2020 budget, debt service commitment and recurrent spending are beginning to crowd out capital expenditure. This trajectory is not consistent with our national aspiration to build infrastructure and a competitive economy. Debt service of N2.45 trillion is more than the capital budget of N2.14 trillion in 2020 budget.
“It is against this background that the new request for $30 billion is troubling. Care should be taken to avoid a full-blown debt crisis,” he warned.
The LCCI boss asked the federal government to look beyond tax credit in its quest for more complementary funding sources for infrastructure.
“We should be looking more in the direction of equity financing. It is also critical to review the spending structure of government and the cost of governance. The ballooning recurrent expenditure, in the face of declining revenue is a cause for concern.”
He asked that the right regulatory environment should be introduced if such police direction is implemented while calling for clarity on the request for the 2016-2018 external borrowing plan by President Buhari.
“There is a need to clarify the place of the new loan request in relation to the 2020 budget and the 2020 -2022 medium term expenditure framework.”
Mr Yusuf urged the federal government to strictly follow the directives of section 41 of the Fiscal Responsibility Act on borrowing.