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Buhari’s $30b fresh loan request troubling, will throw Nigeria to full-blown debt crisis — LCCI

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OBIORAH IFOH, Abuja UGO AMADI, Lagos

Lagos Chamber of Commerce and Industry, LCCI has kicked against fresh request by President Muhammadu Buhari for the federal government to borrow $30 billion describing the move as troubling. And capable of the throwing the country to avoidable full-blown debt crisis.

The chamber which raised the alarm in a statement by its Director-General, Muda Yusuf on Sunday said the planned additional borrowing “is not consistent with our national aspiration to build infrastructure and a competitive economy”.

Also opposing the loan, a former Deputy Governor of the Central Bank of Nigeria, CBN, Dr Obadiah Mailafiyah, said any further borrowing by Nigeria currently with a debt burden of $84 billion will be inimical to the growth of the nation’s economy while the debt stock may increase to $107b in 2020

President Buhari had on Thursday forwarded a request to the 9th Senate to reconsider and approve its 2016 to 2018 external borrowing plan to enable the federal government takes $30b fresh loan.

But cautioning against the move, the LCCI noted that the growing national debt calls for concern as the “debt profile grew from N12.6 trillion in 2015 to N25.7 trillion in 2019 second quarter, an increase of 104percent”.

According to the chamber, 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 N2 trillion; whereas the total capital budget was N2.9 trillion; this implies that the debt service commitment was 70 percent of capital budget allocation. Debt to revenue ratio was about 30 percent, which is also on the high side’’ adding that 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 N2.45 trillion is more than the capital budget of N2.14 trillion in 2020 budget. That is 114% 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.

“The opportunity cost of high debt service commitment for the economy and citizens is very high. There is also the exchange rate risk inherent in the exposure to mounting foreign debt which we need to worry about. 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. The government needs to look beyond tax credit in its quest for more complimentary funding sources for infrastructure. We should be looking more in the direction of equity financing. But 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.

Yusuf said that 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.

Additional 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’, the chamber noted.

Meanwhile, the federal government’s request for Senate approval to get a fresh loan of $30 billion is currently unsettling the upper legislative chamber as the opposition has vowed to resist the Leadership of the Senate over its purported readiness to accede to the request.

President Muhammadu Buhari had on Thursday forwarded a request to the 9th Senate to reconsider and approve its 2016 to 2018 external borrowing plan.

According to a former Deputy Governor of the Central Bank of Nigeria, CBN, Dr Obadiah Mailafiyah, any further loan by the federal government will be inimical to the growth of the nation’s economy.

Dr Mailafiyah who spoke on Friday on Channels Television monitored in Abuja stated that the All Progressives Congress, APC government inherited a debt of $7billion but currently has an overhang of $84billion adding that “the simple meaning is that having inherited $7billion at inception, the government has borrowed $77billion within the past 4 years, making Nigeria now to owe $84billion.

“For the past 30 years, all that Nigeria borrowed was less than $77billion. But within 4 years, Nigeria has borrowed this sum.”

Recall that the former Chairman of Senate Committee on Local and Foreign Debt, Senator Shehu Sani explained recently why the request by Federal Government to borrow $30billion was turned down by the 8th Senate in 2016.

Sani, who warned, in a statement, that Nigeria’s external debt from 2015 to date was on the increase, said: “We turned down the Federal Government loan request for $30billion to save Nigeria from sinking into the dark gully of a perpetual debt trap. We didn’t want our country to be recolonised by creditor banks.

“Our external debt in 2015 was $10.32billion and it escalated to $22.08billion in the second quarter of this year, which is 114 percent increase.

“If we had approved that loan request, our external debt could have catapulted to over $52billion and that is not sustainable.”

He cautioned that with the current escalation of borrowing: “Nigeria will be walking into debt slavery and move from landlords to tenants in our country. They will always tell you that even America is borrowing and I don’t know how rational it is to keep borrowing because another country is borrowing.

“If we keep listening to bankers and contractors, we will keep borrowing and burying ourselves and leave behind for our children, a legacy of debt burden. Loans are not charities. Most of those encouraging more borrowing are parasitic consultants, commission agents, rent-seeking fronts and contractors.”

A source available to Daily Champion said the opposition minority in the upper chambers are already working underground to stultifying the presidential request.

According to the source, who is a ranking member of the Red Chamber, “we have a peculiar case at the Senate now concerning the leadership which has vowed to favour bills from the executive, no matter how obnoxious they may seem but we also have a crop of senators who are responsible and who know that the nation comes first more than any president or party. We are certainly going to resist such bill. It failed in the last Assembly and it will fail again.”

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