The Nigeria Employers Consultative Association (NECA) has warned that the nation’s rising debt profile is not sustainable, advising that government adopts the Public Private Partnership, PPP, in addressing the huge infrastructure deficits.
NECA’s declaration came against the backdrop of a statement credited to Minister of Information and Culture, Alhaji Lai Muhammed, last weekend that the Federal Government has a lot to show for loans so far taken and that those criticizing the President Muhammad Buhari’s administration for borrowing were insincere.
Director-General of NECA, Dr. Timothy Olawale, who spoke for the employers’ body, contended that adopting the PPP approach to financing infrastructure deficit, is the best in a very short term and at a cheaper rate.
Olawale also disclosed that members are more worried about the sharp rise in expenditure profile, against marginal increase in the nation’s revenue.
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He said, “We applaud the mammoth infrastructural development being carried out by this administration since inception; however, it is our belief that more can be achieved with the huge natural, human resources and capabilities available within the economy, if managed appropriately.
“Not to say the least, the debt profile currently at N35.5 trillion is worrisome and unsustainable for an economy like ours.
“We are more concerned by the unprecedented and humongous rise in the expenditure profile vis-à-vis the revenue, which grew by over 102% between 2015 and 2021 with a trifling rise of revenue by only 15% within same period from both non-oil and oil revenue.
‘’The Association is more concerned with a growing economy, where every economic concern generates sufficient revenue that could pay-off reasonably its debt provisions with less impact on its future earnings and accumulate huge foreign reserves.
As infrastructural provision is critical to any development for any economy with robust and friendly business environment, we call for more collaborative efforts in the form of Public Private Partnership (PPP) 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, there is need to review the rising cost of governance and block the leakages in governance, which is becoming a clog to development.”
Recall that experts, including frontline economist, Dr Ayo Teriba, had raised similar alarms last week, saying the country’s debt profile was not sustainable.
Teriba had said, ‘’It is not clear what we should make of the well established fact that interest payments on debt are perennially consuming nearly 100 per cent of revenue available to the Federal Government of Nigeria. There is currently no consensus on the way forward.’’
On dealing with high debt cost, Teriba argued that fiscal policy thrusts had failed to address the primary portfolio management problem at issue which, according to him, is ‘’the urgent need to reduce or eliminate interest payments on existing debt stock through wholesale replacement of expensive commercial bonds in FG porfolio with interest-free commercial bonds that now abound at home and abroad.
This portfolio management failure management failure has absolutely nothing to do with with subsidy regime, tax regime, costs of governance, revenue adequacy (liquidity) and debt sustainability (solvency). While these unquestionably deserve chapters in Nigeria’s unfolding financial narratives, they are red herrings in the chapter on minimising or eliminating interest payments.
‘’Insinuating that debts costs will increase as debt stocks increase is flawed because debt stocks in crease if government chooses more efficient debt types, the most efficient in the current global environment being interest-free commercial bonds.”
