24th April, 2012
Mr. Goodie Ibru, the President of Lagos Chamber of Commerce and Industry (LCCI), on Monday advised the Federal Government to take steps to reduce the growth of domestic debts.
The News Agency of Nigeria (NAN) reports that the nation’s total debt stock is N6.8 trillion out of which domestic debt is N5.96 trillion.
Ibru told the NAN in Lagos that many local contractors were still being owed large sums of money by government and its agencies.
According to him, payment of contractors is hardly remembered when government talks about debt, whereas it is as important as other debts.
“Payment of contractors’ arrears, which is as important as securitised debts, is relegated to the background when the issue of nation’s debt is being discussed.
“There is urgent need to moderate the growth of domestic debts and free resources for investors,” he said.
He said that the current debt profile was not sustainable as the current debt service was 20 per cent of the total revenue.
The LCCI president said that the use of the global benchmark of debt to Gross Domestic Product (GDP) might not be applicable to the nation.
According to him, the major component of the GDP, which is agriculture, is not a revenue generating activity.
“If the agriculture service of the GDP is discounted, the ratio will be much lower than the set threshold,” he said.
According to him, the cost of borrowing, which is between 14 and 15 percent, is high and this is creating distortions in the credit system.
He advised the government to comply fully with the provisions of Fiscal Responsibility Act on debt management.
The LCCI president said the Act provided that government should only borrow for capital expenditure and human development and that they should be on concessionary terms.
He said the loans should also have long repayment periods to ensure that the level of public debt in proportion to the national income “is held at sustainable level”.
Ibru urged the Federal Government to adhere strictly to the provision of the Act which provided that the President should set the limit for consolidated debt for all tiers of government.