Experts Fault FG’s Position On Debt Profile

Some financial experts have expressed concern on the Federal Government’s position that the country’s indebtedness does not pose any problem.

They said in separate interviews in Lagos that whatever affects the international countries would surely affect Nigeria economy.

We recalled that the Minister of State for Finance, Mr. Yerima Ngama, said last Tuesday in Abuja after the National Economic Council (NEC) meeting that the country’s indebtedness would not affect the economy.

Ngama said, “Actually, Nigeria’s indebtedness is not a problem. Currently, both domestic and foreign debts put together constitute only 17 per cent of our Gross Domestic Products (GDP).

“If you see the statistics in most countries, they are above 30 per cent and even in Europe, the GDP stood at 60 or 70 per cent.

“Internationally, the threshold is 40 per cent. So any country that has less than 40 per cent debt to GDP ratio is not facing any critical debt problem.”

Mr. Abiodun Omojokun, General Manager, Apt Securities and Funds Ltd., said that financing the 2012 budget through deficit showed that the nation’s economy was not really in a good position.

Omojokun said that the country should be able to finance its annual expenditures without incurring huge debt from both domestic and international countries.

He said that there was nothing wrong in borrowing.

“But when it involves borrowing to finance consumption or recurrent expenditures, it becomes a problem because of its negative impact on the economy.

“Also, when the nation borrows for production, this will have multiplier effect on jobs opportunities for the unemployed youths”, he said.

According to him, the major challenge facing the nation was the inability to produce due to the inactive of the real sector.

He, however, suggested that the Federal Government should stimulate the real sector so that more goods and services could be produced for both local and export purposes.

Omojokun said that this would impact on the GDP since more revenues would be generated to reduce pressure on the urge to borrow money to finance the nation’s expenditures.

Also, Dr Kazeem Bello, a senior lecturer, Department of Economics, University of Ibadan, said that the criterion used by the Minister of State for Finance to examine the nation’s economy was unjustified since there was no data to support it.

He said that mere looking at the economy showed that the real picture was not reflected in the minister’s statement.

Bello said that the poor performance of the economy was due to ineffective monetary and fiscal policies to check excessive expenditures.

Mr. Peter Kanayo of Lambeth Trust and Investment Company Ltd., said that the country was really experiencing massive unemployment being an indication that the economy was not doing well.

Kanayo said that government should aggressively reactivate agriculture, which in 1970 was the largest employer of labour.

He said that the only way the government could do this was to encourage people to embrace farming by giving them incentives.

Kanayo urged the government to put effective framework in place for agriculture sector and provide the enabling environment for business activities to strive.