FG must improve on information flow on debt utilisation - Expert




The Federal Government has been advised to improve on information flow on debt utilisation in the country. The advice was given in Lagos by Akin Oladeji-Johnbrown, an international financial advisor and stock broker.

Oladeji-Johnbrown, who was speaking at the backdrop of rising Nigeria’s domestic and external debts, said that the real trouble was that the debts have no visible impact on infrastructural development of the country.

“We are increasing our debt and debt mix, but what are we doing with it? Is it to service expenditures or what? Frankly, there is no visible impact of these borrowings on infrastructure development. We still have a lot of abandoned projects here and there. Government as a matter of public policy should attach debt issuance in a transparent way to enable the public know how the debt is being utilised. It appears the current system of debt utilisation is opaque to the generality of the people; hence, government must improve on information flow,” he said.

Concerned about the huge debt profile of Nigeria, and the huge allocation in budgets for debt financing, he said: “There is nothing unusual in debt financing by any nation. In fact, in theory a little level of debt is required for enhancing corporate value. What is of concern is excessive debt. In the case of Nigeria, the statistics have shown that our debt service to revenue ratio is above 60percent, which is exceedingly high. Such high ratio increases the country’s default risk perception. The ability to withstand revenue shock decreases with increasing debt level. As a mono-product economy, a significant fall in oil price may affect our ability to meet debt obligation and subsequent spiral effects.”

According to the information posted by Debt Management Office (DMO) on its website, Nigeria’s total debt profile is N25.7trillion ($83.88billion), comprising N17.38trillion ($56.72bn) domestic, and N8.32trillion ($27.162bn) external.

Oladeji-Johnbrown, who also is the CEO of Futures and Bonds Limited of Nigeria, USA and Canada, said: “At this point, it may be advisable for government to stop further borrowing or restructure the use of existing debt for other uses.”

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According to him, “Our infrastructure borrowing should be directed to revenue-yielding assets rather than use same for social reasons. Of what use is a rail line to middle of now where? Your rail or transport infrastructure should be constructed where you can move goods and services not where you just move people around for social reasons. Furthermore, government should create enabling environment for private capital to flow into the economy without hindrances.

“Although government trumpets so much on ease of doing business, the reality is that the bureaucracy is not making it work as intended. In addition, small scale businesses should be encouraged, particularly from foreign investors. We should de-emphasise focusing on big players. Little foreign capital inflows will generate greater multiplier effects too.”

On whether or not the closure of Nigeria’s land borders can achieve government objectives, he said: “This is sovereignty issue. Nigeria has the right to decide how she wants to deal with land borders with other nations. While current approach or method may be faulted, the truth is that it can’t be closed indefinitely. Although border closure is against the spirit of ECOWAS Treaty, Nigeria cannot continue to allow the country to be a dumping ground for foreign goods or means of sabotaging government economic policy. We are all aware of illegal trade via smuggling of items that are inimical to the populace, not to mention the tax evasion associated with smuggling.”

Speaking on the decision of government to raise Value Added Tax (VAT) from 5 percent to 7.5 percent, Oladeji-Johnbrown, expressed the opinion that “VAT increase is a disincentive to manufacturing and indirectly a burden to the populace.”

“In reality, there is no increase in wages if you consider inflation and devaluation in naira in the last couple of years,” he added.

Recommending a return to the drawing board, he said: “Each state should constitute economic advisory team that will meet quarterly with counterparts in other states of the federation. All the states’ economic teams should meet biannually to share ideas for the development of the country.”