Ensure Buhari’s loan requests fall within approved limits, self-liquidating, Dr.Chizea tells NASS

Nigeria’s top-notch economic and business development consultant, Dr. Boniface Chizea, has reacted to the growing outcries over the nation’s rising debt profile, urging the National Assembly  to ensure that the requests are within approved limits.

The former banker also  charged the lawmakers  to ensure that the targets of borrowings would meet the requirements of low interest, long tenure and grace periods to extenuate the loan burden on the economy and so add incrementally to the burden.

He also advised that the loans be restricted to building up of infrastructure and for human capital development, adding that ideally, loans should be self-liquidating but regretted that at the level of  the nation’s  indebtedness coupled with considerations of challenges of fiscal sustainability “we seem to have lost that privilege.

Dr Chizea was reacting to the public outcry against President Mohammadu Buhari’s latest request   for $4.179 billion additional borrowing. The president had written to the National Assembly, seeking approval to borrow the sum of $4,054,476,863 billion and €710 million. In May, he requested the sum of N2.343 trillion which according to him, was meant to part-finance the budget deficit of N5.602 trillion in the 2021 budget.

Chairman of Presidential Economic Advisory Council (PEDC), Professor Doyin Salami had last week , expressed concerns about the country’s rising debt profile, saying that  Nigeria’s current public debt stock is unsustainable even though the country’s debt-to-Gross Domestic Product (GDP) ratio at 35 per cent seems comfortable.

Salami also lamented that with debt service-to-revenue ratio at 97.7 per cent (January to May 2021), the country’s public debt profile was unmaintainable.

 In a presentation on “The State of the Economy,” he pointed out that the Federal Government’s expenditure had been on the increase, and at a faster pace than its revenue, adding  that public debt had continued to expand on the back of growing fiscal deficit.

A member of council ,Dr. Bismarck Rewane, who shared  the position of Salami, stressed that every Nigerian should be concerned about the nation’s huge debt  profile, which increased further by N2.36 trillion or 7.13 per cent to N35.47 trillion in the second quarter of the year (Q2’21).

Reacting to the issue, Dr.  Chizea  said  “one of the problems we have with fiscal policy is that of poor communication. Or may be stakeholders prefer to sensationalize for reasons best known to them. Those loans were included and approved as part of revenue expectations to fund budget 2021 as was also included in the medium term expenditure framework.

“So, yes, we should worry that the debt profile is rising and from the perspective of Debt Service/Revenue estimated at 97.7% not sustainable. So, it is no brainer that it will increase the debt volume and elevates debt sustainability pressures which is at the verge of resulting to a debt overhang situation.”

As part of his advice to the National Assembly , the renowned  economist  asked the lawmakers “to ensure that the requests are within approved limits and to ensure that the targets of borrowings would meet the requirements of low interest, long tenure and grace periods to extenuate the loan burden on the economy and so add incrementally to the burden.”

He also said that  “the loans must also be restricted to building up of infrastructure and for human capital development. Ideally loans should be self-liquidating. But at the level of our indebtedness coupled with considerations of challenges of fiscal sustainability we seem to have lost that privilege.”

Chizea does not see anything wrong  in borrowing  if the borrowed money is to be channelled to activities that will bring about economic growth and development. Besides, for now, there is no  credible alternative to borrowing .

 Said  he : “We continue to borrow because doing nothing is not a viable option. There will simply literally be no governance and we will reap wide spread unrest as to make the Nigerian space ungovernable.

“When the Edo State Governor recently raised an alarm about currency printing, I thought that outcry was not properly considered.

“ If the Governor went back from Abuja without a cheque and salaries were not paid, what could have been the state of governance at the State?

“How would he contain the inevitable wide spread unrest that will result? So, we should be thankful for little mercies that we are even able to borrow. Countries around the globe are looking to borrow and there are no lenders. Or they borrow at userious rates reflecting the extent of risk inherent on such borrowings,” he said.

Speaking on how the the problem of fiscal sustainability can be fixed , Chizea said “there are no quick fixes here. Whatever solution will be long term. The first challenge to address is to grow our revenue base particularly fiscal revenue. Nigeria tax revenues/GDP at 7%  is not competitive.

It will not be easy to hike the tax rates. They are already high as it  is. We must therefore think outside the box to identify other sources of revenue to broaden the tax net. It is time to enthrone fiscal federalism.

State governments must now be encouraged to increase their internally generated revenue volumes. In that light the ongoing imbroglio with regard to the responsibility for the collection of Value Added Tax should be resolved. Also in like manner with regard to the sharing of stamp duty. It is also time to bite the bullet with regard to the payment of subsidies particularly on PMS. It is clearly a mis allocation of resources and not sustainable.

Earnings from the farms have been negatively impacted due  to the security crises in the land. This is one more reason why, besides the fact that it makes Nigeria economy unattractive destination for direct foreign investments, to spare no efforts to resolve the security crises speedily. Recent developments with regard to the free fall status of the exchange rates today is worrisome.

 There is the urgent need for stability and to narrow the spread between the rates at the official window and the parallel market rates to remove the incentive for round tripping and for speculative tendencies.

 There is the need to plug leakages; the extent of humongous corruption in the polity is frightening. And the relevant agencies must be up and doing to live fidelity to their respective mandates.