The Federal Government would be constrained to borrow more to fund its programmes and projects in the coming year in spite of the heavy debt overhang on the economy. This is as a result of the oil price slump and the country’s falling production capacity. According to recently released data by the Organisation of Petroleum Exporting Countries (OPEC), Nigeria’s crude oil production fell by 205,300 barrels per day in November 2015.
Mrs. Kemi Adeosun, Minister of Finance, justified the intensified public borrowing yesterday when she spoke at the Seventh Yearly Bankers Committee Retreat, in Lagos. According to her, the country has a Debt-to-Gross Domestic Product which is as low as 12 per cent to hold on to “and that gives us some space to manage our deficit budget, which is aimed at stimulating growth. To do that, we need some fiscal house-keeping. We need to borrow, but it must be with the objective of investment in infrastructure and capital projects.
“To achieve this, we still need to look at our budget. If we continue along the trajectory of the recurrent and capital expenditure, together with the supplementary budget just passed, we may end up borrowing for recurrent expenditure. We need the fiscal housekeeping to ensure that our revenue comes in and that expenditure goes out as well.
“We have a sense of where we are going with our Medium Term Expenditure Framework being articulated already, but it is important that you as bankers know because we are coming to you principally to raise money. I need to give you the assurance that we will be raising money, but we are going to do everything possible to ensure that the institutional borrowing goes into detailed expenditures that will produce dividends to the economy.”
However, the Director-General of DMO, Dr. Abraham Nwankwo, has advised the government to pull back its propensity to borrow because the debt to GDP ratio could be illusory. “Following the rebasing of the country’s GDP, DMO was cognizant of the fact that an improvement in the GDP, which resulted in a much lower debt-GDP ratio, does not automatically translate to an equal growth in revenue and therefore, enhanced capacity to service the debt. It would be illusory to rely on the ratios obtained using the rebased GDP as the appropriate benchmark to gauge the sustainability of the Federal Government of Nigeria’s public debt portfolio,” he said.
By Dike Onwuamaeze