9 Takeaways From LCCI 2018 Nigerian Debt Sustainability Roundtable

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Friday, November 16, 2018 11.30PM / Ottoabasi Abasiekong, WebTV

 

The Lagos Chamber of Commerce and Industry established in 1888 and one of the oldest chambers and foremost private sector group in Nigeria, as part of its advocacy role in the business and economic space hosted the 2018 “Nigerian Debt Sustainability Roundtable”. 

This was the concern of the chamber over Nigeria’s perceived rising debt profile and its quest for achieving economic sustainability. 

From the event we bring you 10 takeaways of key talking points from the discourse;

 

Nigeria and a Debt Management Framework

In his opening remarks at the forum the President of the Lagos Chamber of Commerce and Industry, LCCI Mr Babatunde Ruwase, FCA shared that the LCCI was concerned about the rapidly growing public debt and the implications for the country’s fiscal sustainability. 

Mr Ruwase said it was  imperative for Nigeria to set a debt management framework that aligns with the economic growth drive, revenue profile and “ability to pay” realities.

 

Nigeria’s Borrowing is Driven by Shortfalls in Revenue

Mr Joe Ugoala the Director of Policy at the Debt Management Office representing the Director-General informed stakeholders that the borrowings in the country, carried out primarily by the Federal Government was driven by the shortfalls in revenue. 

He noted that the Federal Government has been operating on a budget deficit for several years.

 

Total Public Debt N22.3trn, External N6.7trn

According to Mr Joe Ugoala of the DMO Nigeria, the nation’s public debt as at June, 2018 was approximately N22.3trn, while that of the external debt level hit the figure of N6.7trn.

 

Nigeria’s Debt to GDP Ratio is 18.68%

We learnt from the Debt Management Office at the Debt Sustainability forum that Nigeria’s Debt to GDP ratio was now pegged at 18.68%, which has been described as still safe in the public finance of the country.

 

The Focus of Nigeria’s Debt Management Strategy

From the Debt Management Strategy rolled out by the DMO Nigeria Director of Policy, the focus is to cover the following;

  • Reduce the Cost of Borrowing
  • Address the Issues of the Government crowding out the private sector
  • Lengthen maturity tenure of the Debt Profile 

 

Nigeria is not in a Debt Trap

For all those concerned about Nigeria’s Debt Sustainability status, Mr Bismark Rewane a notable economist and CEO of Financial Derivatives allayed the fears of stakeholders that the nation was not in a debt trap. 

However Mr Rewane warned that Nigeria faces a potential crisis, if it does not manage its debt profile and invest in activities that will boost the economy. 

According to him “Debt is not a problem for Nigeria but the direction and impact is critical” emphasizing the need for the country to borrow to invest in productive ventures, that will transform the economy.

 

The 1977-78 $1bn Eurobond Experience

Learning from Mr Bismark Rewane in his presentation, Nigeria in the period 1977 and 1978 borrowed $1bn Eurobond that was tied to specific projects, that had significant impact on the economy. 

It was used to complete 25 projects which include the Refineries, Apapa Port and part of the Third Mainland Bridge amongst others. 

This is what Rewane referred to as borrowing for investments that will grow the economy.

 

Way Forward for Nigeria’s Debt Sustainability

Mr Rewane at the roundtable identified three key areas Nigeria must give top priority to namely;

  • Nigeria must strengthen its tax system,
  • Block leakages in its Public finance and
  • Channel borrowings to investments into what will drive productivity

 

Addressing the Poverty Concern

Dr Andrew Nevin the Chief Economist of PwC Nigeria in his presentation observed that since 2016 the World Bank index of poverty for Nigeria, has been steadily on the rise. 

He said for the issue to be addressed the nation must pursue a robust economic growth of 6 to 8% annually. 

Citing Mr Bismark Rewane’s analysis of China, Nevin tasked Nigeria to learn from the chinese policy makers that reduced its poverty population from 750 million in 1990 to currently 10 million.

 

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