The Lagos Chamber of Commerce and Industry (LCCI) has raised significant concerns regarding the Federal Government’s recent plan to borrow $2.2 billion, highlighting issues pertaining to debt sustainability and infrastructure funding. The chamber’s stance comes amidst growing anxiety within the business community as Nigeria grapples with economic difficulties exacerbated by increasing debt levels. In a statement released from Lagos, Dr. Chinyere Almona, the Director-General of LCCI, emphasized the urgent necessity for the government to explore alternative funding sources beyond traditional debt financing to uphold the economy’s integrity and stability.
Dr. Almona advocates for the Federal Government to intensify efforts to diversify its revenue streams, particularly focusing on the non-oil sector. This could be achieved by implementing tax reforms and actively promoting sectors such as agriculture, manufacturing, exports, tourism, and solid minerals. By fostering an environment conducive to generating revenue outside of oil, the government could reduce its dependence on debt financing, thereby tackling the looming debt crisis with a more sustainable approach. Additionally, Dr. Almona suggests the privatisation of certain State-Owned Enterprises (SOEs) as a pathway to improving efficiency and maximising asset value while ensuring essential services remain effective.
The business community’s discontent is rooted in what is perceived as weak economic fundamentals, coupled with a lack of clarity on how to navigate through current challenges. The LCCI notes Nigeria’s Debt-to-Gross Domestic Product (GDP) ratio exceeds 50%, with debt servicing costs threatening to eclipse capital expenditure. The country already carries a substantial debt burden, amounting to approximately $17 billion. Dr. Almona underscores the critical nature of these issues, warning that increasing debt levels could further undermine Nigeria’s infrastructure and economic health if not addressed promptly and adequately.
The LCCI reaffirms its position against relying solely on debt for financing budget deficits, advocating instead for a comprehensive financial strategy. According to Dr. Almona, one of the most pressing risks associated with increased borrowing is that debt servicing could soon consume a larger share of the budget than funds allocated for capital projects. Such a trend can stymie infrastructure development crucial for economic growth, leading to broader systemic challenges. Moreover, she raises concerns about potential external currency fluctuations and the impact they may have on servicing loans, particularly given the ongoing instability of Nigeria’s currency, the Naira.
In light of these multifaceted concerns, the LCCI urges the government to manage its borrowing appetite judiciously. Dr. Almona calls for heightened transparency and accountability in the utilization of borrowed funds, emphasising the necessity of channeling financial resources into critical business-support infrastructure. This includes enhancing electricity supply, bolstering food production security, improving logistics, and fostering a manufacturing-friendly environment. She argues that decisive steps must be taken to stabilise the Naira and rectify structural deficiencies within the foreign exchange market to mitigate the adverse effects of external borrowing.
The chamber further recommends an increased reliance on Public-Private Partnerships (PPPs) as a viable means of facilitating infrastructure development while curtailing public borrowing pressures. By encouraging private sector involvement and operational efficiency, Nigeria can potentially bridge funding gaps more sustainably. In conclusion, the LCCI calls on both the Federal Government and the National Assembly to carefully consider the long-term ramifications of the country’s debt situation. A cautious approach towards fiscal management, alongside rigorous scrutiny and evaluation of capital projects, is essential to ensure the successful delivery and implementation of funded initiatives aimed at revitalising Nigeria’s economy.
