THE Nigeria Employers’ Consultative Association (NECA) has expressed concerns over the rising cost of servicing debt and it described it as worrisome.
Speaking at the 61st Annual General Meeting (AGM) of the Association, the President, Mr Larry Ettah, stated that the national budget as recently passed showed that recurrent expenditure as a percentage of total federal government expenditure stands at a staggering 68.50 per cent, an increase from 68.27 per cent in 2017.
He stated that the expenditure pattern is not healthy as it shows a clear indication that the government is yet to accord the issue of infrastructure improvement it deserves through adequate fiscal support.
The NECA boss emphasised that the debt service provision, including a sinking fund of N2.2trillion, is the third largest component of the 2018 expenditure framework representing 24.17 per cent. He said it represents a quarter of the entire budget (N9.12trillion) indicating that debt servicing may soon be back to the pre-debt relief period.
“We are very worried that for the third consecutive year, the rising cost of debt servicing is in the top three allocations in the national budget. In the last three years, the government has had a budget of about N18.012trillion of which debt servicing alone took an average of 23.17 per cent, more than one-fifth of 18.012trillion leaving 13.741trillion for recurrent and capital expenditures” he revealed.
ALSO READ: FEC to approve N8.60trn 2018 budget estimates this week
Ettah reiterated that the debt level as a percentage of the GDP seems in order but considering the debt to revenue ratio, it is unhealthy and not sustainable.
He advised the government to tame its appetite for more leverage as the World Bank in its recent Global Economic Prospects Report had noted with dismay that the current optimism over the country economic is tempered by concerns over huge debt servicing obligations and continuous foreign exchange controls.
He disclosed that the cost of serving the country debt on both the domestic and external fronts has risen in contract to the revenue earned by the government and the bigger concern is the possible unsustainable debt servicing, he added that ” While the debt servicing costs in other economies remain sustainable, that of Nigeria is being dragged down by Naira depreciation and increased recourse to non-concessional borrowing for infrastructure development ”
He urged the government to improve its non-oil revenue generation, as it is the most realistic way to reduce the debt service as articulated in the Economic Recovery and Growth Plan (ERGP).
The NECA boss also cautioned the government not to raise revenue by increasing the tax rate for organised businesses and the working class but alternatively expand the tax net by bringing more people into it.
Meanwhile, NECA elected Mohammed Yinusa as the new NECA president who succeeded Larry Ettah.
and then