N48.5bn debt crippling economy – LCCI
The Lagos Chamber of Commerce and Industry (LCCI) has raised the alarm over Nigeria’s continued escalating public debt profile estimated at N48.5 billion as at December last year. President of the chamber, Mr. Goodie Ibru, stated this in Lagos yesterday at the first quarterly media briefing on the economy.
According to him, the current debt profile is not sustainable, taking into account that current debt service is about 20 per cent of total revenue of government.
Ibru stated this at the first quarterly press conference held yesterday in Lagos. He noted that if Nigeria discounts the agriculture component of GDP in the ratio analysis, the ratio will be much higher than the set threshold.
He observed that only about N1.5 trillion is earmarked for capital project while N560 billion is earmarked for debt service in the 2013 budget thus raising issues of prioritization of resource allocation.
He stressed that the cost at which the government is borrowing is too high and creating distortions in the credit market, adding that private sector is being crowded out when investment in treasury bills and government bonds are more attractive than putting money in fixed deposits.
“There is an urgent need therefore to moderate the growth of domestic debts and free resources for investors in the economy. There should be full compliance with the provisions of the fiscal responsibility Act with regard to debt management,” he said.
He said that borrowing should be on concessional terms with low interest rate and with a reasonable long amortization period subject to the approval of the appropriate legislative body where necessary.
He said that government should ensure that the level of public debt as a proportion of national income is held at a sustainable level as prescribed by the National Assembly from time to time on the advice of the minister.
He said that government borrowing is also creating liquidity problems in the financial system and crowding out the private sector in the market.
Government is borrowing at a high cost of between 14-66 percent which is one of the highest globally.
Ibru regretted that the N48.5 billion debt, domestic debt accounts for N41.97 billion while external debt accounts for 6.53 billion, lamenting that domestic debt presents a much bigger challenge for the economy, thus raising sustainability concerns.
