LCCI knocks Buhari, Senate on fresh $22.7bn loan
The Lagos Chamber of Commerce and Industry has expressed concern over the country’s debt profile and condemned the latest approval of additional $22.7bn loan on Thursday.
The Upper Chamber’s approval was based on the recommendation of the Senate Committee on Local and Foreign Debts.
In his recent letter, the President, Major General Muhammadu Buhari (retd.), explained that the external borrowing plan targeted projects cutting across all sectors with emphasis on infrastructure, agriculture, health, education, water supply, growth and employment generation.
But the Director General, LCCI, Dr Muda Yusuf, said the latest loan had brought the total debt stock to $108bn, even though 15 per cent of the debts were owed by the state governments.
He said, “The growing national debt is a cause for concern as the debt profile grew from N12.6tn in 2015 to N26.2tn in the third quarter, 2019, an increase of 108 per cent.
“An additional $22.7bn borrowing would bring the total debt stock to $108bn, although 15 per cent of the debts are owed by the state governments.”
He said the capacity to service the current stock of debt raised serious sustainability concern.
He added, “The debt service provision in the 2019 budget was a whooping N2tn, whereas the total capital budget was N2.9tn. This implies that the debt service commitment was 70 per cent of the capital budget allocation.
“Debt to revenue ratio was about 30 per cent, which is also on the high side. In the 2020 budget, the total revenue could barely cover debt service commitment and recurrent spending.
“The opportunity cost of high debt service commitment for the economy and citizens is very high.”
Yusuf called on the government to evolve appropriate policy choices to attract equity from domestic and foreign private sector capital for infrastructure financing.
“The government needs to look beyond tax credit in its quest for complementary 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,” he said.