The Lagos Chamber of Commerce and Industry has faulted the proposal of the federal government to use N10.57bn new loans to finance the deficit in the 2023 budget.
Premium News reports that of the proposed loans,N8.8 trillion in new commercial loans while N1.77 trillion drawdown on bilateral and multilateral loan
Director-General of the chamber,Dr.Chinyere Almona,said it was wrong for Nigeria to consider the loans at a time when the country is placed on the watchlists of some of its foreign bondholders, and the world is still trying to process our president’s well-publicized call for debt cancelation at the last United Nations General Assembly.
She said:’’It is the exclusive use of debt to finance deficits that got us into the situation where we cannot keep the revenue we are earning today, as we use the bulk of our revenue to settle interest payments, and it is increasingly not enough to cover the interest payments. In the 2022 year-to-April, the interest payments were more than the revenue, and it is most unlikely that the revenue will be more than interest payments in in the full-year 2022 or even in 2023.It is comforting that the 2023 budget is still at the proposal stage. It behooves all well-meaning stakeholders to make constructive inputs to the Presidency and the National Assembly now. Can we consider more efficient alternatives to new borrowings? Can we issue equity to finance the deficit instead of using debt? Can we break from the path in which the Federal Government only approaches the debt markets at home and abroad and never approaches the equity market at home or abroad? Investors invest in debt.
‘’But they also invest in equity.Our approach should not be to continue issuing only debt, especially with the increasingly unbearable burden of interest payments that exposes our fiscal vulnerably. Massive equity financing is the choice we should all urge the Federal Government to consider now. Nigeria should henceforth use equity financing as an exclusive way of funding budget deficits. If we embrace equity financing, we do not have to make huge interest payments, and we can use some of the proceeds of our equity issuance to pay some of down debt, to make the fiscal situation more sustainable and rekindle much-needed confidence in our economic and fiscal resilience’’.
She reasoned that it was not too late to use equity to fund the 2023 deficit proposal,adding that the current administration should be encouraged to take advantage of the equity choice to bequeath a legacy that the incoming administration can build upon.
She said high rate of inflation will continue to distort most of the budget assumptions and targets if not curtailed,adding that particular attention must be put on investing more on transport infrastructure in resolving the many logistical challenges that have impacted the movement of goods across the nation.
‘’Looking beyond oil revenues, we can enhance our forex earnings through increased inflow of foreign direct investments. We need to invest more in infrastructure and critical port reforms to reduce the bottlenecks in our export logistics and processes that will boost non-oil production and exports.The allocation of N470billion to revitalize the tertiary institutions and enhance salaries of university staff is commendable and at least a show of concern about the plight of the university community in recent times.
‘’However, we must accept that the current funding model for our universities is not sustainable in the face of the many revenue challenges being tackled by the government. A more sustainable way is to grant financial autonomy to the universities with a new emphasis on equity investments for infrastructure. In addressing the most significant components of human development, we urge the governments at all levels to remain consistent in funding education, health, infrastructure, and security. One-off funding cannot address the decay in these areas within a year. It must be a practice and tradition of seeking robust equity funding for these areas consistently.
‘’It is now obvious to us that we may not even be able to source debts from foreign investors as in the past. Many factors have diminished our debt ratings, and this should push the government to consider immediate issuance of wholesale equity investment at home and abroad to fund idle assets to finance the deficits instead if borrowing more.We must immediately block revenue leakages by curbing oil theft, pipeline vandalization, and trimming excessive fuel, power, gas, and forex subsidies, as well as massive tax and duty waivers to lift revenue to N20 to N30 trillion thresholds from the present N6 to N10 trillion thresholds’’