Nigerian Government Cautioned on Borrowing Spree

The decision of the Nigerian federal government to commit N50billion to a job creation scheme has not gone down well with the Lagos Chambers of Commerce and Industry (LCCI). Otunba Femi Deru, president of the LCCI in a release made available, described it as a risky adventure. "We are concerned that such public sector driven programmes have very little chance of success, and there is the risk of exposure to heavy politicization, creation of ghost workers and the typical corruption in the public sector," he said.

President Goodluck Jonathan presented a N4.226trillion Budget for 2011 to a joint session of the National Assembly on December 15, and it has not since, seized to generate debates. It was the first time he would be addressing the joint sitting of the National Assembly. The budget was predicated on an exchange rate of N150 to a dollar, oil production of 2.3million barrels per day at a benchmark of $65 per barrel. He put the total revenue forecast at N2,836.43trillion, N542.38billion for debt services, and N196.12billion for statutory transfers.

The commitment of N542.38billion (about $3.6billion) to debt servicing, has however, been described by LCCI as excessive. Deru observed that the amount was more than 50 per cent of the amount set aside for capital projects in the budget. "In the 2010 budget, N497 billion was earmarked for debt servicing.  This is simply not in the best interest of the people.  This further underscores the need to moderate the quantum of borrowing by government," he said. According to him, the debt management office ought to slow down on the rate at which it is issuing bonds while the Central Bank of Nigeria (CBN) should also reduce the issuance of treasury bills.  Deru observed that the cost of servicing domestic debt in the economy has become unsustainable and unbearable. While he averred that the opportunity cost to the economy was too high, he suggested that if $3.6 billion was additionally committed annually to power sector it would surely have a major impact. 

The LCCI noted that: "The implementation performance of previous budgets has created perception and credibility problems for the annual federal budgets.  Most times, there were no visible connection between budget pronouncements and the outcomes.  This is a big issue that needs to be redressed so that the annual budgets are not seen as a mere ritual."  

Although the Nigerian president stressed that his government would be mindful of the need to respect the deficit threshold recommended by the Fiscal Responsibility Act, as a way of reducing budget deficit within prescribed limits, the LCCI noted that Shortcomings in conception, preparation,implementation of budgets, corruption as well as a misplacement of priorities, have become a matter of grave concern to the business community.

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