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By Merit Ibe
With the huge 2023 budget deficit to be financed by borrowing, the Lagos Chamber of Commerce and Industry (LCCI) has advised that the Federal Government can issue equity to finance the deficit instead of using debt.
The chamber made the remark at a press conference on the state of the economy, where the President of the chamber, Michael Olawale-Cole, opined that the country can break the path in which the Federal Government only approached the debt markets at home and abroad and never approached the equity market at home or abroad, saying investors invest both in debt and equity.
“Our approach should not be to continue issuing only debt, especially with the increasingly unbearable burden of interest payments that exposes our fiscal vulnerability.
“Massive equity financing is the choice we should all urge the Federal Government to consider now. Nigeria should henceforth use equity financing as an exclusive way of funding budget deficits. We do not have to make colossal interest payments if we embrace equity financing.
“We can use some of the proceeds of our equity issuance to pay some of the debt, make the fiscal situation more sustainable and rekindle much-needed confidence in our economic and fiscal resilience.
Beyond the figures and policy statements contained in the 2023 budget, the chamber recommended that the budget monitoring agencies should promote more transparency and inclusion in the budget processes towards improving the ranking of nigeria in the open budget index carried out by the international budget partnership (IBP) through its open budget survey (OBS).
“Transparency, oversight and public participation in the national budgeting process are necessary to boost the confidence of nigerians in the budget process.”
He further suggested that governments at all levels must put actionable policies in place to address the high fuel and food costs. The high inflation rate will continue to distort most of the budget assumptions and targets if not curtailed.
“Particular attention must be put on investing more in transport infrastructure to resolve the many logistical challenges that have impacted the movement of goods across the nation.
“Looking beyond oil revenues, we can enhance our forex earnings through the increased inflow of foreign direct investments. We need to invest more in infrastructure and critical port reforms to reduce the bottlenecks in our export logistics and processes that will boost non-oil production and exports.
“We can improve the performance of the 2023 budget by studying how the 2022 budget has performed. Looking at what has worked well, what failed, and what must be corrected in the implementation of the 2023 budget.”
With the excruciating burden of inflation, forex scarcity, high energy cost and weakening purchasing power, the LCCI boss projected that many more production activities might be constrained in the coming months.
“The high inflation rate and continuous rise in interest rates are major factors responsible for the contraction in the manufacturing sector.”
He therefore recommended that
the federal government needs to sustain its targeted interventions in selected critical sectors like agriculture, manufacturing, export infrastructure, and tackling insecurity.
“Government should keep track of plans to tackle oil theft, boost oil exports and earn more foreign exchange. We also commend the government for the effort being made to-date to combat the cartel involved in oil theft. If these efforts had started earlier, the nation would have made huge economic gains.
“Government should deploy innovative thinking to tackle natural disasters like flooding by implementing environmental guidelines and establishing preventive infrastructure. The impact of climate change on agriculture is becoming more evident by the day, and quick response is critical to avert food insecurity and worsening food inflation.”
