The Nigeria Employers’ Consultative Association has warned that the growth in Nigeria’s external debt was jeopardising the economic growth efforts of the Federal Government.
The association raised this concern in a statement on Tuesday titled ‘Salvaging the Nigerian economy from total collapse: A call for urgent action’.
The Director-General of NECA, Dr Timothy Olawale, in the statement noted that Nigeria’s debt servicing was affecting funds needed for investment and infrastructural development.
He said the revised 2020 budget showed that the country spent N3tn on debt servicing, which accounted for 27 per cent of the total expenditure and 35.6 per cent of the revenue.
“With all the borrowings, there seems to be insignificant impact in some economic objectives as there is still widespread unemployment, high poverty levels, poor infrastructural development and poor health indicators,” he said.
The NECA DG said analyses of debt servicing provisions to revenue projections in Nigeria’s annual budget over a five-year period revealed that in 2016, 38.34 per cent of the year’s budget was earmarked for debt servicing.
He added that in 2017 (36.2 per cent); 2018 (30.7 per cent); 2019 (32.14 per cent); and 2020 (35.6 per cent) were allocated to debt servicing.
Olawale said, “This is not only worrisome but alarming. We believe that the growth of external debt stock and debt service payments is becoming a clog in the wheel of national economic growth efforts.
“It is obvious that if the growing trend is unabated, Nigeria could face the gory experience of Greece (Euro-zone crisis of 2015).”
He said borrowing to finance recurrent expenditures would not portray Nigeria in the right light, and could spell doom for the country.
Olawale stressed that public debts should be tied exclusively to capital projects with feasible income and debt repayment potential.
He advised that proceeds from the sale should be channelled into financing annual budget deficits.
The NECA DG noted that the current state of the economy showed that Nigeria was at risk of heading into a deeper challenge.
He called for drastic and immediate economic transformation, focused and strategic engagement in order to avert this risk.
“As there is no one-size-fit-all approach in salvaging an economy faced with multi-faceted challenges like ours, we suggest a mix of fiscal, monetary and trade policies with political will in delivering the necessary actions,” he said.
Olawale urged the government to hasten the process of diversification of the non-oil economy to expand the revenue sources.
According to him, revenue from non-oil sector is more feasible and less volatile than the oil revenue and will support a buoyant and a robust economy.