Adamu says FG can borrow till eternity; It’ll lead to disaster — NECA, Atiku, LP, others
Politics
NATIONAL Chairman of ruling All Progressives Congress, APC, Abdullahi Adamu, yesterday came under attacks over his comments that the federal government could borrow till eternity to fund the country’s infrastructure regeneration, as the Nigeria Employers’ Consultative Association, NECA, Labour Party, PDP presidential candidate, Abubakar Atiku, and economy experts faulted his declaration.
Adamu, while speaking in an interview on Trust Television late Monday, had said the government could borrow from now till eternity, saying countries like the United States and the United Kingdom borrow funds from international financial institutions to meet their needs.
His position was, however, faulted by NECA, Labour Party and other economy experts who noted that the nation’s debt profile had become unsustainable, in the face of dwindling revenues, stressing that there were alternative ways of funding infrastructure.
They also added at further increase in the national debt could lead to high inflationary economic growth or no growth at all, a much higher cost of capital in the economy, and possible sovereign default and its damaging effects.
FG’s borrowing spree
President Muhammadu Buhari has been criticised for the increased borrowing of the Federal Government since the inception of the administration in 2015.
This led to N29 trillion or 67 per cent increase in the national debt to N41.6 trillion at the end of March 31, 2022, from N12.6 trillion at the end of 2015, as the Federal Government continued reliance on borrowing to fund its annual budget.
Recently, the Minister of Finance, Zainab Ahmed, disclosed that FG had to borrow N3.09 trillion between January and April this year to fund its expenditure and service its debt during the period. During the four month period, the FG recorded revenue of N1.63 trillion, spent N4.72 trillion out of which N1.94 trillion was spent on debt service.
FG can borrow till eternity — Adamu
Adamu said: “I remember a programme we had here, I told you and I thought you believed me that I have no quarrel with government borrowing. Government can borrow from here to eternity. The American government borrows, the Canadian government borrows, the United Kingdom borrows, France borrows money from the World Bank and such other institutions.
Nigeria is no exception, what I quarrel with is if the money is not used for a purpose and the infrastructure we are developing across the country is from this source.
“You also have to appreciate the fact of the level of revenue accruing to the government, oil is the main thing.. We want to see how best we can diversify. These issues affecting the revenue accruing to the government are not our making. No matter how good we are, they happen.
“When some countries sneeze, we catch a cold. The Ukrainian crisis with Russia is having an impact on our economy and even in bigger economies than our own, so why do we limit ourselves in our thinking.”
There are alternatives to borrowing —NECA
Reacting, Nigeria Employers’ Consultative Association, NECA, said there were alternative ways of funding infrastructure, adding that debt should not be the first option.
The umbrella body for employers in the country equally expressed worry over whether the funds being borrowed would be judiciously used, considering past experiences.
The Director-General of NECA, Wale Oyerinde, said: “While we are not against government’s borrowing to fund critical “Cash-Back” infrastructures, we are, however, concerned about the propriety of the borrowing at this time when it has become expedient to drastically reduce our exposure to further debt.
‘’Of concern also is whether the funds would be judiciously used, considering past experiences. It is no news that the nation’s cost of governance is abnormally high and overboard. Rather than borrowing being the first option in view of current economic realities, it would be reasonable for the government to realign its priorities and look inwards.
‘’There are several moribund government structures and assets that could be leased or sold off, rather than leave them in a perpetual dilapidated state.
“In the last decade, government borrowings have been to fund recurrent expenditure and expensive governance, leaving the country in huge debt with consequences for current and future generations. ‘’While experts continue to aver that our debt-to-GDP ratio is healthy, the real challenge we must address is our debt-to-revenue ratio which, according to the Minister of Finance, Budget and National Planning, is tending towards negative.”
Reckless, endless borrowing’ll lead to disaster —Atiku
Also reacting last night, Atiku Media Office expressed sadness that the leadership of the All Progressives Congress was still advocating reckless borrowing amid an economic tailspin which Nigeria was currently grappling with.
It noted that despite several words of caution by the Peoples Democratic Party, PDP, presidential candidate, Atiku Abubakar, who has consistently earned against the unwise decision by the current administration to engage in such borrowing, it was still talking about borrowing.
Media Adviser to the PDP candidate, Mr. Paul Ibe, who reacted on behalf of his principal, said Atiku had in several statements, articles and tweets, cautioned the President Muhammadu Buhari-led federal government against mortgaging Nigeria’s future with borrowings.
He said: “Nigerians will recall that in one of his articles, titled: ‘Endless Borrowing Will Lead to Endless Sorrowing‘ the Wazirin Adamawa, foretold the economic disaster we are in today.
‘’He not only drew government’s attention to the economic dangers but also suggested ways to mitigate it. The APC-led administration ignored him and we are all suffering for it today.
‘’In his founders day lecture at the American University, Yola, almost three years ago, quoting from the American, John Quincy Adams, who said, ‘there are two ways to conquer and enslave a nation. One is by the sword. The other is by debt’’’
‘’Atiku noted that the American may have very well been referring to Nigeria of the last three years because Nigeria’s debt serving has now outweighed its income. No nation runs its economy like this. ’APC owes Nigerians a duty to at least, stop compounding our woes with additional borrowing to feed consumption.’’
It’s shows how myopic the ruling party is — LP
Reacting to Adamu’s statement, spokesman of Labour Party, Dr. Doyin Okupe said: “Such statement shows the level of how myopic the ruling party can be about the future of Nigeria youths.
‘’It shows they don’t have any good plan for Nigeria. Do they want foreigners to take over Nigeria? It is high time the National Assembly sat-up and prove to Nigerians that they are not rubber-stamps as they are being perceived by many.”
APC chairman spoke from position of ignorance — Olayinka
Investment expert and CEO, Wyoming Capital and Partners, Tajudeen Olayinka, said in his reaction: “I think APC chairman spoke from the position of ignorance. While a sovereign nation can borrow money from multiplicity of sources, through issuance of debt instruments to investors from all across the world, including domestic investors, or make special arrangements with bilateral or multilateral sources, the question of perpetuity of such borrowings depends largely on the capacity of the sovereign nation to refinance her matured or maturing obligations timeously.
“Interestingly, the capacity to refinance debts is a function of the ability of the sovereign nation to manage debt sustainability. Where sustainability is in doubt, it might be difficult to raise additional finances under such terms and conditions that are supportive of the country’s economy.
“In other words, debt instruments issued by a country experiencing sustainability problems could attract higher or outrageous yields, inimical to economic growth and development.
“In fact, such instruments are treated as junk bonds in the international capital market. If care is not taken, especially with the way Nigeria is beginning to have difficulty improving her revenue generation capacity, relative to her debt service obligations, the country might fall into that negative territory in no distant future.
‘’So, it is important that the government should begin to retrace its steps in good time, in order not to put the economy in a big mess. Private sector-driven economy requires much lower public debts, and could produce a better economy for all.”
On the consequences of eternity borrowing by Nigeria, Olayinka said: “The economic consequences of unsustainable debts are: high inflationary Gross Domestic Product, GDP, growth or no growth at all, a much higher cost of capital in the economy, possible sovereign default and its damaging effects, unemployment could become a major issue, persistent macroeconomic imbalances, etc.”
For what purpose are we borrowing for eternity — Prof Uwaleke
Reacting as well, Prof Uche Uwaleke , President, Association of Capital Market Academics and a former Finance Commissioner in Imo State, said : “The key question this raises is for what purpose are we borrowing?
“If the loans are self-liquidating, then there is no cause for alarm. But, if they are not well applied such that the country’s debt burden is aggravated, thereby mortgaging future generations, then it does not make sense to borrow. ’In sum, borrowing is positive for Nigeria only when it advances economic growth and development.”
Government’s penchant for reckless borrowing signifies poor management— Oni
In his reaction, Chartered Stockbroker and Managing Director/CEO, Sofunix Investment and Communication, Sola Oni, said: “Government’s penchant for reckless borrowing signifies poor management of resources.
‘’Deployment of Ways and Means Financing, WMF, which is continuous printing of currency, has dire consequences of unsustainable payment of interest and loss of confidence in the sovereign status of such a country in the international financial market.
‘’Rather than indulging in a borrowing spree, the Federal Government should take advantage of immense opportunities for capital injection in the financial capital market to raise development funds at cheaper rates.”
-Vanguard
KN
Related Posts
HURIWA warns Wike against arrogance of power
…demands probe Into land grabbing allegations THE Human Rights Writers Association of Nigeria (HURIWA) has strongly condemned the Federal Capital...
Read MoreIdris urges State governments not to downgrade, scrap ministries of information
Kaduna State Governor Senator Uba Sani county (left) and Minister of Information and National Orientation, Mohammed Idris, at the 48th...
Read MoreReps direct NUPRC to provide details of oil production, crude sales
THE House of Representatives has mandated the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) to provide details of all oil production,...
Read MoreMost Read
Subscribe to Our Newsletter
Keep abreast of news and other developments from our website.