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Some finance
experts have stated that Nigeria, contrary to general opinion, is in
fact a highly under borrowed economy, and needs to venture into
constructive borrowing for the right reasons.

“If we had a
purposeful government that actually wants to address infrastructural
displacement, then they must borrow” Ayo Teriba, managing director,
Economic Associate, stated at the firm’s 3rd quarter Economic
Assessment, held in Lagos on Tuesday.

Nigeria’s debt
profile rose in the 80’s to 160 percent of the nation’s real GDP,
before it finally fell to less than 20 percent in 2006.

“Right now, we are
not borrowing to invest; we are borrowing to pay pension allowances, to
get voters register and the likes. It shows the lack of vision on the
part of the nation’s leadership,” Mr. Teriba said, adding that though
United States remain the largest borrowing country in the world, all
its debts are domestic, because the people have confidence in their
government.

Nigeria’s external
debt rose in the mid 80’s because of the devaluation of the exchange
rate. In the process, the non public sector that had borrowed the
government funds lost value of their funds, which in turn led them to
lose confidence in borrowing government funds.

Judicious use of funds

Sunday Salako, a
member of the National Economic Management Team (NEMT), said the issue
is not about if the nation was over or under borrowed, but what the
borrowed funds are actually being used for.

“The question is
how are these funds being utilised? The issue is in the last four
years, how many roads have been constructed? How many roads have been
repaired? You can borrow money if there are issues you have that need
to be addressed with the borrowed funds, but not in a situation where
there is nothing tangible that is ready to be addressed.

“Look at South
Africa. Do you know how much they borrowed during the World Cup period,
but the result is evident, you can see it, not the type that you would
only read in papers and would not see physically. Yes, borrowing is
good if it is used to instigate economic activities, such as building
good roads, transportation, and power. But when these do not exist,
what then are we saying? No major road has been constructed in the last
four years or even more,” Mr. Salako said.

Last month, the
Debt Management Office (DMO) said it had pegged borrowing next year to
$7.1 billion, in a bid to control public borrowing and keep Nigeria’s
debt within sustainable porch.

The office, in a
report, said that the Net Present Value (NPV) of the country’s debt,
currently at 16.2 percent of gross domestic product, would crash to
about 2.2 percent, by 2020 and 0.9 percent by 2029, if effective debt
management practices are put in place.

Abraham Nwankwo,
director general of DMO, said with this forecast, total public debt is
expected to grow from $31.4 billion presently to about $38.5 billion
next year, to be sourced from both domestic and external institutions
in a 60:40 proportion respectively, in line with last year’s analysis.