Concerns Grow Over FG’s Fresh Borrowings
As the federal government prepares to go borrowing in 2023 to fund the year’s fiscal policies, Nigerians have expressed concerns about the plan which they said will further endanger the economy and the citizens as a whole .
Federal Government has disclosed in the new budget, the plan to borrow N8.8tn to finance the 2023 budget deficit.
This will add up the country’s debt stock to well above N52 trillion in view of the already existing loan stock of N42.8 trillion as of the half year 2022 ended June 30.
A professor of Economics at Alex Ekwueme Federal University, Frank Ozor, said if the Government should continue to borrow, they should channel the borrowed funds for production and real investment
He said public debt by borrowing externally or domestically is not the problem but financinng consumption with the borrowing.
The Don said it will be better if such is channelled to productive activities that will lead to increases in national income, aggregate output and multiple jobs, and raising export receipts.
“Therefore, if borrowing will achieve these goals within a reasonable medium and long term element of time, then borrowing is worthwhile”.
“This notwithstanding, during abnormal time periods, like war, famine, epidemic etc. a country may borrow; otherwise it will be pointless for it borrow” he added.
According to Professor Ozor, if this principle is not followed, a country may slip into debt overhangs and secular debt burden over economic “growthlessness” with instability and colossal underdevelopment and distortive factors.
He raises concern on the huge corruption and indiscipline in the country, stating that it will be difficult to borrow money to realise these objectives under these situation.
Ozor also flawed the wholesome dependence on the oil sector which he describes as a cog on the wheel of Nigeria’s economic success.
“There is over dependence in the oil sector. Presently, Nigeria cannot meet its own OPEC quota and as the world is solidly moving away from the fossil fuels into less carbon emissions and footprints energy sources, coupled with the non-diversified export baskets and productive base, in both agrarian, manufacturers and services sectors “
He described Nigeria as a poor state, noting that the vicious circle of poverty factors, some of which are economic and non-economic, act and react in such a way that the Nigerian economy remains poor.
“Don’t be confused with oil producing nation status or aspects. How an oil producing nation utilises its oil wealth to eliminate the economic and non-economic backwardness does matter much”.
He noted that most oil exporting countries are poor countries, including S. Arabia and Iran, the quantum of oil and money do not count but how a country does has transformed its society using the oil resources or available resources for rapid and radical socio-economic progress does matter.
According to him, In a country where the Acting Accountant General, claimed that government has been borrowing to pay salaries and a minister claimed that the amount used in debt servicing is over and above government revenue, then it is very much in doubt that within the present outlook of things that the government has adjusted structurally.
He advised the government to secure lives and property, minimize corruption and indiscipline, eliminate socio-political, ethnic and religious backwardness and ensure the right attitude to work, reinforce real investment that will lead to the increases in national income and multiple employment to achieve economic growth with stability under the milieu of huge debt overhang.
He said if the government cannot eliminate distortive factors, such as to allow the government to move the borrowed funds to investment and productivity rather than to consumption, then the government must limit consumption to its productivity.
A Senior Lecturer in the department of Mass Communication at the same Alex Ekwueme Federal University, Joseph Chukwu said the government is adding economic chaos, to the already collapsed education system wich shows the current administration has collapsed
He stated, that “ Nigeria is a sinking nation which needs to be salvaged by a right minded leader”, urging the people to vote wisely in the next election.
With the additional new borrowing of N8.8 trillion that will push up, the debt profile by May next year., and couple If the borrowing from the CBN [ways and means], which is currently about N20 trillion that will further push up the total debt to N70 trillion by end of 2023, Muda Yusuf, former Director General, Lagos Chamber of Commerce and Industries said this should be a cause for concern. Yusuf who is now, the Chief Executive Officer, Centre for the Promotion of Private Enterprise [CPPE], said a number of issues need to be addressed for Nigeria to achieve its fiscal sustainability aspiration.
“Government owned enterprises managing huge economic assets need to justify the value of assets at their disposal. Returns on investment on those assets have been consistently sub optimal for many years. These include government enterprises in maritime, and oil and gas, for example. It is instructive that some reforms are ongoing at the NNPC.”
He advised that oil revenue performance should be much better given the prevailing global oil price while lapses in the petroleum upstream ecosystem such as the impunity of crude oil theft and vandalism of oil facilities needs to be urgently addressed.
“The foreign exchange policy regime is adversely impacting on business environment and needs to be urgently addressed. Weak private sector performance would naturally affect non oil tax revenues”.
There is a need for budget reforms. The budgetary appropriations must reflect urgent national economic priorities. There are also concerns about value for money and other forms of fiscal leakages. The Auditor General of the federation had severally raised these concerns.
While he sought a reform of road infrastructure financing, Yusuf said road fund bill needs to be revisited to ensure sustainable funding of road infrastructure across the country, pointing out that budget funding for roads cannot guarantee quality road infrastructure for a country over 200 million people.
“We note the reference by Mr President to PPP options for infrastructure financing. However, the macroeconomic and egulatory environment needs to improve to inspire confidence of investors in infrastructure within the PPP framework. Current macroeconomic and foreign exchange policy regime are major disincentives to investors in infrastructure, especially the foreign investors. We need the inflow of such foreign capital to complement government funding in infrastructure.
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