LCCI, ACCI, Raise Concerns As Buhari Seeks Approval For Fresh $6.1bn Loan
The Abuja Chamber of Commerce and Industry and the Lagos Chamber of Commerce and Industry have both raised concerns over the rising debt profile of Nigeria following Buhari’s request that the Senate should approve another N2.3tn external loan.
The President, ACCI, Dr Al-Mujtaba Abubakar, said the chamber was aware of the government’s plan to fund the deficit in the 2021 budget.
He, however, told our correspondent that the government should be mindful of the adverse effect of excessive borrowing.
Abubakar said, “We, however, urge the Federal Government to take judicious note of the negative side of excessive borrowing, especially on interest payment among others. We particularly called attention to the already high debt service rate and its attendant depletion of revenue earnings.
“We once again call on the Federal Government to minimise borrowing and focus more on cutting the cost of governance. If this is not done, debt service may soon further cripple the economy and dampen any hope of higher GDP growth.
“When other economic indices are considered, it is clear the administration needs to urgently embark on cost chatting measures before it is too late.”
On his part, the Director-General, LCCI, Dr Muda Yusuf, said although the request was not an entirely new proposition, the government should be cautious of growing the country’s debt profile.
He said, “The rising debt profile of government raises serious sustainability concerns. Although government tends to argue that the condition is not a debt problem, but a revenue challenge.
“But the truth is that debt becomes a problem if the revenue base is not strong enough to service the debt sustainably. It invariably becomes a debt problem.”
“What is needed is the political will to cut expenditure and undertake reforms that could scale down the size of government, reduce governance cost and ease the fiscal burden on government.”
Yusuf said it was important to ensure that the debt was used strictly to fund capital projects that would strengthen the productive capacity of the economy, adding that emphasis should be on concessionary financing, as opposed to commercial debts which were typically very costly.
In response to the president’s loan request, Prof. Adeola Adenikinju, an energy economist, told our correspondent that the country had a serious revenue generation problem that should be addressed.
He said that for FG to meet its expenditure, one of the options was to increase the rate of Value Added Tax which in the current economic situation, was impossible.
Adenikinju said, “The withdrawal of subsidy which would have freed up some cash for the government is mired in political debate.
“Also, curbing wastage in expenditure is something the current administration does not seem to be doing well.
“Borrowing in itself is not bad as many countries fund their budgets with debt, but we have to look at the current debt exposure and the ability to pay the loans.
“Debt servicing was reported as almost equivalent to revenue in 2020. The question now is how does the government want to pay back the debt.”
He added, “The country has been overdependent on oil as 90 per cent of foreign exchange comes from it. Now is the time to walk the talk towards economic diversification that has been continuously discussed.
“The govt needs to take intense action and direct policies to industries with the capacity to generate income like manufacturing and tourism. Revenue expansion is critical at this moment; else we will be forced to keep borrowing.”