The Lagos Chamber of Commerce and Industry (LCCI) and the Manufacturers Association of Nigeria (MAN) have shown concerns over the moves by the Federal Government to raise fresh foreign loan amounting to $30 billion.
Reacting to President Mohammadu Buhari’s loan request already placed before the National Assembly for approval, Director General of LCCI, Mr. Muda Yusuf, said the growing national debt is a cause for concern as the debt profile since inception of the present government has ballooned from N12.6 trillion in 2015 to N25.7 trillion in Q2 of 2019 which is an increase of 104 per cent.
He stated: “There is also the bigger worry about the capacity to service the debt. 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 percent 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. This is 114 percent of capital budget.
“It is against this background that the new request for $30 billion is troubling and require caution to avoid a full blown debt crisis.
“As the currency depreciates, the burden of servicing foreign debt would intensify. This is a major problem with increasing the stock of foreign debt.”
Speaking for a way forward from the impending predicament, Muda further added: “This underlines the need for appropriate policy choices to attract domestic and foreign private sector capital for infrastructure financing.
“The government needs to look beyond tax credit in its quest for more complimentary funding sources for infrastructure.
“We should be looking more in the direction of equity financing.But for this to happen the policy and regulatory environment must be right.
“It is also critical to review the spending structure of government sand the cost of governance.”
Commenting on the loan request the Director General of MAN, Mr. Segun Kadiri, stated: “On the face of it and in my opinion, the 39 emergency projects in the Power, Agriculture, Transport & Mining sectors of the Nigerian economy alluded to by Mr. President should redress some of our infrastructure and sectoral performance/linkage deficits.
“To this extent, the projects are needful and their successful completion would boost the productive capacity of the Nigerian economy.”
“However, the rising debt profile of Nigeria continues to be a cause for concern, especially the capacity of Government to effectively service it and at the same time, meet the bursting needs and aspiration of the citizenry going forward.
“Already, our budget projection for 2020 anticipates a debt service sum of N2.45trillion, an amount higher than the N2.14 trillion earmarked for capital expenditure.
“Also, our total external debt stands at $27.16 billion, while Domestic debt has climbed to $56.72 billion.
“Nigeria’s debt stock increased by 3.11 percent from $81.27 billion recorded in the first quarter of 2019 to $83.88 billion (N25.70 trillion) at the end of June 2019.
“This is almost 13 percent increase year-on-year from the $73.21 billion at the end of June 2018. And even though our debt-to-Gross Domestic Product (GDP) ratio, which currently stands at 28 per cent, is still below the average in Africa, our revenue-to-GDP ratio remains low” he lamented.
Mr David Adonri, Managing Director/CEO, Highcap Securities and Investment suggested that: “Instead of the government taking it upon itself to undertake those economic and commercial ventures, they should look for a way of coming up with appropriate policies and incentives to encourage the private sector to handle all those economic and commercial development projects.”