Nigeria Won’t Make Progress Without More Borrowing

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*Says FG may compel MDAs to buy locally made
vehicles

With $86.39 billion (N32.9 trillion) total debt stock, Nigeria
will not make progress unless it borrows more to fund critical
infrastructure, Minister of Finance, Budget and National Planning,
Mrs Zainab Ahmed, has said.

She spoke at the maiden special media briefing by the MDAs
organised by the Presidential Communications Team at the
presidential villa, Abuja, on Thursday.

According to her, even though the country has expanded its
borrowing, it is still below 25 per cent debt to GDP ratio and
within the borrowing limit.

She said borrowing is necessary to roll out infrastructure now
and not later.

Responding to question on excessive Chinese loans taken by the
country and consequences on debt servicing, she explained: “On the
issue of Chinese loans, if I may be permitted to speak to the
question by the business. I think it’s useful to look at the budget
for each year; look at the revenues, look at the expenditure, if
you take out the new borrowing, really, what will the size of the
budget be? How much can the government spend?

“So, there will be a lot of capital projects that are affected.
So, we need to look at it that borrowing is, even as you see it in
the budget every year, used to support infrastructural development.
Otherwise, there will be a challenge.

“Secondly, let me add. I think we’re going through a process
where we need to borrow now. Let’s just say in the short to medium
term, to get the economy going, while we also expect revenues to
improve.

“So, in terms of the pressure of debt service, by the time the
revenue comes up, that should be lower, but there are some things
you need to do now, to ensure that revenue comes up. So, we need to
keep that in mind that if the economy grows and revenues improve,
then debt service to revenue, in future, should be lower.”

While acknowledging that the government’s borrowing has become a
touchy issue, Ahmed maintained that it is not misplaced.

She further said: “There is a lot of sensitivity in Nigeria
about the level of borrowing by the government and it is not
misplaced. And I said earlier that the level of borrowing is not
unreasonable, it is not high.

“The problem we have is that of revenue. So, what we need to do
is to increase revenue to be able to enhance our debt to GDP
obligation capacity. If we say we will not borrow and therefore not
build rials and major infrastructure until our revenue rises
enough, then, we will regress as a country.

“We will be left behind, we won’t be able to improve our
business environment and our economy will not grow. So, it is a
decision that every government has to take.

“Our assessment is that we need to borrow to build our major
infrastructure. We just need to make sure that when we borrow, we
are applying the borrowing to specific major infrastructure that
will enhance the business environment in this country.

“Again, we all have to work not just the Federal Government but
state governments to increase our revenue to enhance our debt
service obligations.

“We also have to make sure that when we are choosing the
projects, we are choosing carefully the ones that will enhance the
business environment so that more revenue yields come into the
treasuries of the country.”

Still, on the borrowing threshold, the minister stated: “The
total borrowing of the country as of 31 of December is 21.6% of the
GDP. So, if we were not looking at adding the other category of
loans that I mentioned, we don’t even need to increase that at this
time. As of 2019, the debt to GDP ratio was 19.2%. So, only 2 per
cent was added.”

She affirmed that all that is needed is for government to
increase its local revenue, saying: “The more revenue we realise
out of the budget, the less we borrow. As we see the oil price
rising and provides us with more revenue, it provides us with some
reliefs. We will be able to reduce our borrowing. So, it is a
positive thing for us.”

The minister revealed that the Federal Executive Council (FEC)
will soon to approve a policy mandating Ministries, Department and
Agencies (MDAs) to buy locally manufactured vehicles.

She said as part of measures by the government to control
inflation in the country, it has already reduced duties on imported
vehicles from 35 to 5 per cent with a view to lessening the high
cost of transportation, which in turn, impacts on inflation.

According to her, patronising locally made vehicles will
mitigate against dumping due to reduced duties.

The minister maintained that the federal government is committed
to purchasing locally made goods and vehicles and would engage with
state governments to ensure that they do the same so as to
encourage local production.

On the new import duty policy, she said that the Nigeria Customs
Service has already directed all its outposts to commence its
implementation.

She added: “Nigerian Customs has reviewed these guidelines and
has notified all its operational posts to start implementing the
new rates. So, it has taken effect.

“The Federal Government is committed to buying made in Nigeria
products and buying made in Nigeria vehicles in particular. So, we
will be hoping to have a Federal Executive Council approval to
compel federal government agencies to buy made in Nigeria vehicles
as much as is practicable.

“So, when the security agencies need a security vehicle that is
a special design, and you don’t have it in Nigeria, we will still
need to buy the ones that are outside.

“We’re hoping to also engage the states and encourage the states
to take similar measures. It is important for us because we want to
make sure the automotive industry survives and grows.

“The Federal Ministry of Industry, Trade and Investment has just
finished a review of automated policy, which has been running now
for seven years. I must say that the policy has not been reviewed
before. So, this is the first review that is being done and the
essence of the review is to see whether it has achieved the
designed targets.

“Once the ministry gets its approvals, then the review will be
announced and perhaps there will be a refreshing of the measures
that are contained in that policy.”