ADVERTISEMENT

$30bn loan: LCCI warns against full blown debt crisis

DG, LCCI, Muda Yusuf.
DG, LCCI, Muda Yusuf.

The Lagos Chamber of Commerce and Industry (LCCI) has expressed worry over the growing national debts, warning against a full blown debt crisis as President Muhammadu Buhari moves to secure a fresh $30billion loan.

The Director-General of LCCI, Muda Yusuf, chronicled that Nigeria’s debt profile grew from N12.6trillion in 2015 to N25.7trillion in 2019 second quarter, an increase of 104 percent.

ADVERTISEMENT

He noted that 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 N2trillion; whereas the total capital budget was N2.9 trillion; this implies that the debt service commitment was 70% of capital budget allocation. Debt to revenue ratio was about 30%, which is also on the high side.

“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 N2.45trillion is more than the capital budget of N2.14 trillion in 2020 budget. That is 114 percent of capital 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 said.

According to Yusuf, the opportunity cost of high debt service commitment for the economy and citizens is very high; noting that, there is also the exchange rate risk inherent in the exposure to mounting foreign debt, which he said is worrisome.

“As the currency depreciates, the burden of servicing foreign debt would intensify.  This is a major problem with increasing the stock of foreign debt.

“This underlines the need for appropriate policy choices to attract domestic and foreign private sector capital for infrastructure financing,” he added.

He stressed the need for government to look beyond tax credit in its quest for more complimentary funding sources for infrastructure, and urged government to look more in the direction of equity financing.

“For this to happen, the policy and regulatory environment must be right.

“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.

“There is a need to clarify place of the new loan request in relation to the 2020 budget and the 2020 – 2022 medium term expenditure framework.

“Also, borrowing should strictly be in line with section 41 of the Fiscal Responsibility Act which stipulates that ‘Government at all tiers shall only borrow for capital expenditure and human development, provided that, such borrowing shall be on concessional terms with low interest rate and with a reasonable long amortization period,” he stated.

Download Daily Trust News App

Get it on Google Play
Share this article

Join us on


Share your story with us: 08189301900 (Whatsapp and SMS only) Email: dtonline@dailytrust.com

Complain about a story or Report an error and/or correction: +2348189301900

DISCLAIMER: Comments on this thread are that of the maker and they do not necessarily reflect the organizations stand or views on issues.