The Lagos Chamber of Commerce and Trade (LCCI) has expressed apprehension over the Federal Authorities’s plan to safe a $2.2 billion mortgage, cautioning that the transfer might exacerbate debt sustainability challenges and hinder essential infrastructure growth.
The LCCI, in a press release launched on Friday, highlighted the pressing want for Nigeria to diversify its funding sources past debt financing.
The Director-Basic of the LCCI, Dr. Chinyere Almona, urged the federal government to accentuate efforts to increase the non-oil income base via tax reforms and promote export-driven sectors reminiscent of agriculture and manufacturing.
She emphasised various funding choices, together with boosting exports, tourism, agriculture, and strong mineral assets, as viable means to cut back reliance on borrowing.
Moreover, Dr. Almona advisable the privatization of sure state-owned enterprises (SOEs) and bettering the effectivity of people who stay underneath authorities management to reinforce income technology.
Debt sustainability considerations
Dr. Almona famous that Nigeria’s debt-to-Gross Home Product (GDP) ratio, estimated to be over 50%, coupled with debt servicing prices that overshadow capital expenditure, raises critical considerations.
Based on her, the nation’s exterior debt already stands at roughly $17 billion, with implications for future financial stability.
“The LCCI warns of imminent debt sustainability points which will additional weaken essential infrastructure within the nation,” Almona mentioned.
She additionally highlighted the danger of exterior forex shocks as a result of naira’s depreciation in opposition to the greenback, which might additional pressure the economic system as debt servicing prices rise.
Name for fiscal prudence and transparency
Dr. Almona urged the Federal Authorities to prioritize transparency and accountability in deploying borrowed funds.
“Funding essential infrastructure ought to take priority, because it underpins financial development and job creation,” she acknowledged.
She burdened the necessity to channel loans into essential infrastructure that helps enterprise development, reminiscent of electrical energy provide, meals safety, and manufacturing enablers.To cut back borrowing pressures, Almona proposed larger reliance on Public-Non-public Partnerships (PPPs) for infrastructure growth, emphasizing the effectivity and innovation the non-public sector might deliver to the desk.Almona referred to as for pressing measures to stabilize the naira and deal with structural points within the international alternate market, noting that the Central Financial institution of Nigeria’s ongoing struggles to spice up international alternate provide have but to yield vital outcomes.
“Lowering exterior borrowing is essential, as the continual depreciation of the naira amplifies the burden of debt servicing,” she added.
The LCCI urged the Federal Authorities and the Nationwide Meeting to rigorously assess the long-term affect of Nigeria’s present borrowing trajectory.
“The federal government should tread cautiously on the trail of fiscal prudence. Mission accountability, efficient monitoring, and analysis of capital tasks are important to make sure the environment friendly use of borrowed funds and the supply of tangible outcomes,” Almona suggested.
The chamber reiterated its dedication to advocating for sustainable financial insurance policies that guarantee fiscal duty and strengthen Nigeria’s financial foundations.
Backstory
The Nigerian Senate on Thursday at plenary authorised the brand new exterior borrowing plan request of $2.2 billion {dollars} offered for consideration by President Bola Tinubu.
The approval adopted the adoption of the report of the Senate Committee on Native and Overseas Money owed. The report was offered by the Chairman of the Committee Sen. Aliyu Wammako (APC -Sokoto).Presenting the committee‘s report, Wammako mentioned the presidential request was very crucial for approval.He mentioned the mortgage request could be utilised for the execution of ongoing tasks and packages within the 2024 appropriation act, saying that the tasks had been essential for nationwide development and growth.
