Review direction of debts to stimulate economic growth, experts urge FG

Economists on Friday called on President Mohammadu Buhari’s led Federal Government to review the direction of the country’s debts, in order to spur productivity and economic growth.

The experts expressed their views at a forum on “Nigeria’s Debt Sustainability: Issues and Way forward’’ organised by the Lagos Chamber of Commerce and Industry (LCCI).

Mr Bismark Rewane, Managing Director, Financial Derivatives Company, said the country’s debt profile would not be a concern if its Gross Domestic Product (GDP) was growing at about 8 to 10 per cent.

He said existing data showed that the country’s debt was growing at a faster rate than GDP, growing at a time that productivity level had declined resulting to less prosperity for the citizens.

The economist said borrowing to spend and borrowing to invest were two different things, and that funding fiscal debt amounted to the government borrowing to spend.

According to him, Nigeria floated its first Eurobond of 1 billion dollars in 1978, and used it to complete 25 sector-specific projects, amongst which was Apapa ports, Inner Marina road and aircraft purchase.

“Tell me what roads would be completed or refinery that would be functional by the time the various bonds floated by government matures; lending should be sector specific and impactful,” he said.

He stressed that government should reset its debt profile, adding that the country was moving from debt problem to debt crisis and if left unchecked, it would result in a debt trap.

He added that elongated debt could translate to intergenerational debt.

“The solution is to increase the injection at the investment level, when you do that, it grows employment and to grow investment means that you increase the level of confidence of domestic and foreign investors.

“Also government’s policies should be well aligned, create equitable distribution of wealth and equal opportunities for citizens, strengthen tax institutions to increase revenue collections and reduce leakages,” he said.

In the same vein, Mr Andrew Nevin, Chief Economist, Pricewaterhouse Coopers (PwC), said the country had declined in per capita GDP since 2015 to 2017.

He said this was likely to decline in 2019 also, adding that the IMF also predicted a decline in 2020 to 2022.

“This indicates that we are getting poorer each year,” Nevin said.

He said government should eliminate fuel subsidy and dual foreign exchange rate, improve on the country’s ease of doing business, and also tap into the potential of the real estate sector.

Mr Ayo Salami, Partner, KPMG Nigeria, said there had been consistent shortfall in government’s projected revenue in the last few years, and that the country’s debt would surpass its revenue in the next five years, if the trend was left unchecked.

He urged the federal government to review some of its abandoned and ongoing projects.

He said the Ajaokuta Steel plant and the refineries were not generating revenue, but that the government kept pumping funds into them annually.

Salami, therefore, called for a review in cost of governance, block leakages in Customs revenues and check inefficiencies at the ports, which were contributing to cost of production and affecting economic growth.

Earlier, Mr Babatunde Ruwase, President of LCCI, said the chamber was concerned about the rapidly growing public debt and its implications for the country‘s fiscal sustainability.

“The Debt Management Office (DMO) put the nation’s total debt stock (Federal, FCT and States) at N22.38 trillion (73.21 billion dollars) as at June 30.

“Debt service to revenue ratio which currently stands at over 40 per cent is on the high side, with implications on the country’s capacity to deliver infrastructure investments. Our revenue can barely cover our recurrent expenditure.

“Many state governments are still grappling with huge debt service burden which is impeding deliverables on vital developmental projects. Many other states depend largely on Federal Government grants and allocations to survive,” he said.

Ruwase said it was imperative for government to set a debt management framework that aligns with its economic growth drive, revenue profile and “ability to pay” realities.

Meanwhile, the Director-General, Debt Management Office (DMO), Ms. Patience Oniha, said its current strategy was to reduce the interest expense on government’s debt.

She said DMO hoped to achieve a debt mix of 60 per cent and 40 per cent for domestic and external debt respectively.

Oniha represented by Mr Joe Ugoala, Director, Policy Strategy and Risk Management, said DMO also planned to increase the long-term portion of the domestic debt to 75 per cent.

She said debt to GDP in Nigeria at 20 per cent was one of the lowest figures in the world.

The director general added that it was lower than the limit of 40 per cent and showed that the economy had huge fiscal sustainability space if revenue could grow faster than its current level.