Nigeria’s Rising Debt : NECA calls for more PPP, diversification of non-oil economy

Chris Uba

The Nigeria Employers’ Consultative Association (NECA) has renewed call for more Public Private Partnership (PPP) in addressing the huge infrastructure deficits, in a very short term and at cheaper rate  than the borrowing spree approach adopted by the Federal Government.

The Director-General  of NECA , Dr. Timothy Olawale ,who stated this  during  an interview with the Oracle Newspaper, said  it is  the belief of the Organised Private Sector  that implementing the PPP initiative in provision of the country’s critical infrastructure, decent and sustainable jobs will be provided and desirable number of people will be lifted from the poverty rank even before the desired date of 2030.

 Olawale said with the unpredictable nature of global oil prices and developments in usage of alternative sources of fuel and modern technology, it is more appropriate to hasten the process of diversification of the non-oil economy in expanding the revenue sources away from oil, adding that  it is obvious that revenue from non-oil is more feasible than the oil revenue.

He spoke against the backdrop of   President Muhammadu Buhari’s letter in August to  the Senate  requesting  approval of a fresh external borrowing to the tune of $4.054 billion , a fresh borrowing  which will increase  the country’s external indebtedness  to  an all-time high of $45.2 billion.

Buhari in the letter dated August 24, 2021, and read during the plenary  this week by President of the Senate, Senator Ahmad Lawan, is asking for external borrowing of $4.054billion, €710million, $125million in an addendum to the 2018-2020 borrowing plan.

According to Olawale, while  the request for approval of foreign loan is statutory process for the President to seek, since the loan was provided for and approved in the 2021 Appropriation Act, therefore, it is logical.

However, when viewed against the backdrop of  the rising debt profile of the country, it  calls for grave attention as the revenue to service such debt is not increasing in the same quantum of the debt.

Said  Dr. Olawale:  “we believe that the request for approval of foreign loan is statutory process for the President to seek, since the loan was provided and approved in the 2021 Appropriation Act, therefore, it is logical.

“However, the rising debt profile of the country calls for grave attention as the revenue to service such debt is not increasing in the same quantum of the debt.

“Surprisingly, the Debt Management Office (DMO) released showed that the country’s debt profile has reached N35.465 trillion as of June 30 this year, which indicated that within 6months, the debt stock rose by N2.35tr. More worrisome, our expenditure profile increased by 102% between 2015 and 2021 while revenue increased by only 15%.”

 According to the NECA DG, “it is often stated that the country’s debt to GDP ratio is within the threshold, that is 35% still comfortable, however, more worrisome is the debt service to revenue ratio at 98% between January – June, 2021, meaning that for every N100 earned, N98 has gone into debt servicing.

This is worrisome and should be stopped as it is unsustainable for any economy before we entered into debt trap.”

“ Noticeably, the stock of our debts is more of domestic than external, as domestic loans is about N21.75trillion, (61.3%) of the total debt stock, while external debts accounted for N13.7trillion (38.3%).

“The crowding out effect of domestic borrowing is huge on business survival in generating the needed impetus for development and creating decent jobs for sustainability and competitiveness.”

Olawale said “as often canvassed by the Organised Private Sector on the growing Debt debacle, that in the wake of dwindling revenue to the coffers of governments, we call for more Public Private Partnership in addressing the huge infrastructure deficits, in a very short term and at cheaper rate.

“ It is our belief that implementing the PPP initiative in provision of the country’s critical infrastructure, decent and sustainable jobs will be provided and desirable number of people will be lifted from the poverty rank even before the desired date of 2030.

“More so, with the unpredictable nature of global oil prices and developments in usage of alternative sources of fuel and modern technology, it is more appropriate to hasten the process of diversification of the non-oil economy in expanding the revenue sources away from oil. It is obvious that revenue from non-oil is more feasible than the oil revenue.

“This will result in buoyant and robust economy which will reduce the need for external debt to the barest minimum. Exploration of the various natural mineral deposits in the country for processing and exportation should be explored.

“It is imperative to say that Government at all levels should provide more friendly business/economic policies to attract investors, the Apex bank should forge ahead in achieving the total unification of the exchange rate and availability of foreign exchange for productive activities.

“It is, therefore, apparent that the Central Bank of Nigeria (CBN) timely consolidates the unification of the exchange rates and shun the practice of multiple currency practices, which have not demonstrated the true reflection of the naira in the market.”