FG’s mounting debts signal danger for economy, says NECA

Nigeria Employers’ Consultative Association (NECA) says Nigeria’s mounting debt burden could have negative implication developmental capacity of the economy given that about 25 percent of the 2019 budget size of N8.8 trillion amounting to N2.140 trillion is going into servicing of debts.

Asides this, NECA also pointed out that the Federal Government’s uncontrollable appetite for borrowing within the domestic market is limiting the real sector from accessing funding for expansion and growth that should ultimately lead to increased employment opportunities within the economy.

Timothy Olawale, the Director General of NECA, who stated the position of the employers’ body, on Wednesday, said this development was worrisome and needed to be checked.

Latest figures released by the Debt Management Office (DMO), showed that the Federal Government’s domestic debt profile rose to N15.814trillion in September, 2018 from N15.629trillion in June, 2018 (1.19% increase).

According to Olawale, this figure becomes more worrisome when viewed from the total public debt stock, comprising the external and domestic debt of the Federal Government, the 36 states and the FCT which stands at US$73.208billion (N22.38 trillion) as at June, 2018.

Discussing the implication of the huge borrowing in the domestic market, for example, he said: “The size of government borrowing in the domestic financial market continues to be a major source of concern, as this has in no small measure, affected the chances of the real sector to access funding at a reasonable cost.

Also on the amount proposed for debt serving in the 2019 budget, he said: This trend, which is very disturbing, could have a negative effect on the developmental capacity of Nigeria despite government’s financial managers’ argument that the rate of increase is within a manageable limit.” He noted that “financial experts at the International Monetary Fund (IMF) and the World Bank have in fact, advised that the revenue-to-debt ratio is unsustainable and it portends a serious danger for the future generation”.

Olawale warned that while the effect of the increasing debt may not be immediate in totality, it could be catastrophic in the long term with a chunk of revenue consumed by debt servicing to the detriment of infrastructural development.

As a way out, he advised that “the federal and state governments, as a matter of urgency, must take deliberate steps aimed at cutting the cost of governance and recurrent expenditure. “Government also needs to start paying serious attention to workable investment schemes, collaborating strongly with the private sector which is the engine room for economic growth.”

The NECA DG also want the government to recognize the important role of the private sector in building a robust economy, as oil revenue alone is not enough to place the country on the path of sustainable development.

“Government must therefore, make commitment to facilitate a favourable environment with policies that will attract private investors,” he said.

JOSHUA BASSEY