Nigeria’s rising debt profile, unsustainable ― LCCI

The Lagos Chamber of Commerce and Industry (LCCI), on Tuesday, in Lagos, joined the increasing number of voices against the nation’s rising debt profile, as it argued that continued accumulation of debt, in the light of dwindling oil prices and production, was becoming unsustainable.

Briefing the media on the state of the nation’s economy, the Chamber’s president, Mrs Toki Mabogunje, stated that the nation’s rising debt profile, without corresponding impact on output growth and economic development, was becoming increasingly worrisome to the Chamber.

According to the LCCI boss, the rising debt and the high level of debt servicing would continue to hinder robust investments in infrastructures, thereby not allowing the much-needed productivity and improvement of living standards.

“At the peak of the pandemic in the second quarter, the Federal Government received financial support worth $3.4billion and $288.5million from the International Monetary Fund (IMF) and African Development Bank (AfDB) respectively, while negotiations are also ongoing for a cumulative $1.8billion credit support from the World Bank, African Development Bank (second tranche) and Islamic Development Bank.

“Adding this to prospective domestic issuances could possibly push the country’s public debt stock to around N34trillion by year-end, equivalent to 23per cent of GDP.

“The growing level of the country’s debt is fast becoming unsustainable in the light of dwindling oil prices and production. Our position is reinforced by the uptrend in debt-service to revenue ratio from 60 per cent by year-end 2019 to 72 per cent as of May 2020,” she argued.

While acknowledging the various strategies put in place by the Central Bank of Nigeria (CBN) to conserve the nation’s foreign exchange resources, Mabogunje, however, called on the apex bank to, in addition to the demand management strategies it had adopted, also consider the supply sides issues.

She insisted that besides regulating the supply of foreign exchange resources, it had become imperative for the apex bank to also adopt strategies that would ensure a free flow of foreign exchange.

One of such, she added, was by creating an enabling environment for businesses to thrive.

“The CBN is trying regarding the management of the nation’s foreign resources, but the emphasis has been on the demand management side. But we should be looking also at the supply side. For instance, how do we encourage the supply of foreign exchange into the economy?

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“It is not enough trying to curb demand or suppress demand. We should also be looking at policies that can encourage inflow. Inappropriate forex policies could discourage fresh capital inflows, be it a foreign direct investment, portfolio investment, remittances, and non-oil export proceeds to the economy,” she stated.

The LCCI boss also predicted that the nation’s economy might experience a mild contraction in the third quarter, and as a result goes into recession, being the second consecutive time, this year it would experience such downturn, this year.

While also expressing grave concerns about the rising spate of insecurity in the country and its attendant fatalities, Mabogunje described the situation as capable of impacting negatively on investors’ perception of Nigeria, as an investment destination.

NIGERIAN TRIBUNE