LCCI cautions FG on borrowing to meet fiscal obligations

Merit Ibe

The Lagos Chamber of Commerce and Industry (LCCI) has cautioned the Federal Government on the continuous use of debt to meet its  fiscal obligations especially at a time the country is struggling to generate adequate revenue.

The chamber advised that the option of equity financing should be rigorously explored since  it is a better and more sustainable financing strategy that could be deployed to bridge fiscal deficit. 

President of the chamber, Toki Mabogunje, gave the warning at a press briefing in Lagos. The Lagos Chamber is deeply concerned about the country’s rising debt portfolio.

According to official statistics from the Debt Management Office (DMO), public debt stock increased by 4.5  per cent to N28.63 trillion as of March 31, 2020, from N27.40 trillion as of December 31, 2019. 

“We note the Federal Government’s resolve to raise funds locally and externally to bridge the deficit in the fiscal budget.

“The Federal Government has secured $3.4 billion and $288.5 million credit facilities from the International Monetary Fund (IMF) and African Development Bank (AfDB) respectively, while discussions are on-going for another $1.5 billion facility from the World Bank. This could possibly push the country’s debt stock to around N33 trillion by year-end, equivalent to 22 per cent of GDP.”

On the  unification of the exchange rate, the chamber noted that depreciation of the local currency has positive and negative implications for the economy.

“It would boost the naira value of oil revenue, reduce exchange rate premium between official and parallel market rates, discourage round-tripping, ease the liquidity crisis in the forex market and correct external imbalances.”

Commending the Economic Sustainability Plan (ESP) of the Federal Government aimed at ensuring that the economy recovers quickly from the effect of the COVID-19 pandemic and continues on a growth path sustainably, the LCCI recognised that the plan , as submitted by the committee, seeks to foster new ways of working, producing, learning, and managing public health and safety in the years to come. Though the chamber criticised the composition of the ESP committee, which  largely excluded the organised private sector in drawing this plan, it  enjoined the government to pursue the implementation of the ESP with utmost commitment and strong political will devoid of sentiments or political affiliations so that proposed initiatives in the plan can produce the desired outcomes.

“As a concerned stakeholder in the economy, we call on the federal and state governments to engage the organized private sector where and when necessary, to ensure the economic sustainability plan achieve the desired outcomes that would ultimately translate to improved living standards for the Nigerian citizenry.”

It also acknowledged the postponement of the planned hike in electricity tariff by the power distribution companies(Discos) to the first quarter of 2021, considering its impact on households and businesses who are yet to recover from the COVID-19 shock. 

However, the chamber recommended that equitable billing demands that electricity consumers are metered.

To the chamber, this is the only way to engender the confidence of consumers in the billing process.  “Metering should therefore be accorded a high priority.”