Why we are borrowing – FG

The Federal Government on Thursday said that it was necessary to
continue to borrow in order to invest in infrastructure after the
country failed to invest in it when there were heavy revenues from
the sale of crude oil.

Minister of Power, Works and Housing, Mr Babatunde Fashola, and
his counterpart in the Ministry of Finance, Mrs Zainab Ahmed,
justified the borrowing which had been condemned in some quarters
as excessive at the symbolic presentation of N100bn proceed from
the Sukuk bond issued by the Federal Government on December 28,
2018.

Fashola, who jokingly said that he would be happy to receive the
cheque despite the wobbling performance of the public address
system at the event, added that the economy benefitted in diverse
ways when the government made an investment in infrastructure.

Our correspondent on Wednesday reported that Nigeria’s total
debt stood at N22.43tn as of September 30, 2018.

As of June 30, 2015, the country’s total debt stood at N12.12tn.
This means that within the tenure of the present administration
which came to power on May 29, 2015, the country’s total debt has
risen by N10.31tn or 85.06 per cent.

According to Fashola, borrowing does not only enable the
government to finance critical infrastructure but also to power
other aspects of the economy.

He said, “For those who ask: why are we borrowing? We are
borrowing to build assets that will last us over 30 years which if
we wait will be more expensive to build.

“More importantly, where is the money going? As soon as I
collect this cheque, I am going to give it to the contractors. But
even the contractors can’t keep it. They have to give it to their
suppliers because they need quarry materials; they need bitumen;
they need iron rods; they need cement; they need tyres; they need
diesel.

“When this money moves, it is going to the miners to produce
building materials and construction materials. It is going to the
steel company to produce steel. Who are the people that will also
benefit from it? Again, the banks are going to benefit.

“As the money is being lodged and moved out, charges are being
made. So, the whole economy benefits from this. In closing, the
manufacturers of bitumen are waiting. The manufacturers of cement
and steel are waiting. This is how building drives an economy.

“Of course, the most important for us are the people we ignore
as a nation – builders, artisans, labourers. They are also waiting.
We can’t wait to receive the money because this is dry
weather.”

Ahmed clarified that the N100bn Sukuk funds would be used to
further support the government’s capital spending on road projects
already captured in the 2018 budget.

Giving a breakdown of investors’ contribution to the funds
raised, she said 40.69 per cent came from Pension Fund
Administrators, 17.5 per cent from Deposit Money Banks and 17.33
per cent from retail investors.

Also, she said that 11.65 per cent came from fund managers and
non-bank financial institutions, 10.94 per cent from non-interest
banks and 1.89 per cent of the fund came from other investors.

She expressed gratitude to investors who had bought into the
government’s programme by investing their resources in the Sukuk
fund issued by the Federal Government.

She said, “There is for us a clear indication of the acceptance
of this finance product. The significant increase in the level of
participation by retail investors moved from about four per cent in
the last issuance to 17 per cent in this current issue.

“This means that the Federal Government’s objective of financial
inclusion is deepening. We now have a wider base of Federal
Government securities and this is on the upward trend. Let me just
say that we had specifically 1,876 retail investors that
participated in this particular Sukuk issuance.”

Information released by the Debt Management Office showed that
the fund would be used to construct a total of 642.69 kilometres of
road across the six geopolitical zones of the country.

Each of the six zones got N16.67bn for different road projects
ranging from three to six.

Such projects include the dualisation of Lokoja – Benin Road;
the dualisation of Abuja – Lokoja Road; the reconstruction of Benin
– Shagamu Road; the dualisation of Kano – Maiduguri Road; the
dualisation of Oyo – Ogbomosho Road; the rehabilitation of Onitsha
– Enugu Road and the rehabilitation of Enugu – Port Harcourt
Road.