Abraham Nwankwo, a former Director-General of the Debt Management Office (DMO), has said that Nigeria’s infrastructure deficit can be addressed with debt financing, making Nigeria’s infrastructure bankable for investors, while also urging the federal government to tie borrowed funds to specific projects.
Nwankwo who was the Lead presenter at the 2019 annual lecture of Just Friends Club of Nigeria, held on Thursday in Abuja, however called on the nation’s economic managers to ensure a debt sustainable framework with good macro-economic indices that would ensure funded projects are bankable to attract more funding commitments from the Private sector investors.
The lead speaker admittedly noted that Nigeria is the biggest infrastructural market in the continent, but unfortunately has a complex investment climate, as he called for structured bankability of Nigeria’s infrastructure to attract sectoral funding from pool of funds from various parts of the world.
He noted that assessment of debt sustainability in the latter case should focus on whether and how the additional debt would be effectively applied to the development of infrastructure, to pull the economy out of backwardness; how it would enable the economy to establish a growth trajectory that would enable it regain or enhance debt sustainability and more stable growth, by a forecasted time.
“The secret is that it is feasible to articulate a bold plan for the transformation of the economy,” Nwankwo said.
“The Transformation Plan, financed with new debt towards one that is more diversified, more competitive, more export-capable and less vulnerable to external shocks. Specifically, the new debt will generate adequate output and cash-flow to cover its servicing and amortization and create surplus, while avoiding, by design, foreign exchange risk,” he said.
The net impact of the new debt on debt sustainability, therefore, is that by creating value added, it even helps to reduce the pre-programme debt burden, rather than exacerbate it, Nwankwo said.
Nwankwo who made case for a structured macroeconomic model in ensuring debt sustainability called on the economic managers to prioritise it before going for borrowing whether domestic or internationally.
A robust macroeconomic model with detailed financial programming is perhaps the most important component of the plan documents; it will elicit the trajectory of transformation, breakthrough and self-sustaining growth that would result from the capital injection in big infrastructure development. It will demonstrate how exchange rate risk will be neutralized,” he noted.
The former DMO boss expressed firm belief in the federal government’s ability to use sustained debt in closing the infrastructure gap explained that in spite of the country’s problematic debt profile, a plan-based, project-tied, output-driven, and commercially-modelled and private-sector-managed debt programme remains a “robust option for financing Nigeria’s infrastructure development
Also, Toby Okechukwu, the Chairman, House Committee on Housing and infrastructure at the event made case for a road fund bill, which is at the verge of being submitted to the President for assent.
“The annual budget is not complete, and never enough. The seed capital for road development, and maintenance would be through the road fund,” he said.
He argued that the fund is meant to have some road user charges like having tolls, some fees from consumed petrol, and weighing charges, that would be warehoused for those who manage and maintain the roads.
According to him, if the bill was passed, there it would guarantee money coming from a particular place which would make funding and maintenance of road a lot easier, while complementing what is budgeted for annually.
HARRISON EDEH, ABUJA
