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LCCI raises alarm over Nigeria’s rising debt portfolio

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By Seun Ibiyemi

The Lagos Chamber of Commerce and Industry (LCCI) has raised alarm and called on the Federal Government to adopt measures to increase the country’s revenue and borrow from cheaper sources to cushion Nigeria’s debt portfolio.

Dr Michael Olawale-Cole, President, LCCI, gave the advice in a statement on Monday in Lagos.

Olawale-Cole said the advice had become necessary because the country’s rising debt stock was becoming increasingly problematic in the face of dwindling revenue and the unsustainable burden of subsidy payments.

He said that most recent statistics on government revenues showed poor performance and mounting government costs, making it evident that Nigeria was going through a debt crisis.

He noted that aggregate expenditure for 2022 was estimated at N17.32 trillion; at the end of April, a revenue of N5.77 trillion was expected but only N1.63 trillion was realised as government’s retained revenue.

Olawale-Cole added that within the same period, government’s actual spending stood at N4.72 trillion; N1.94 trillion on debt servicing, N1.26 trillion on personnel costs, leaving only N773.63 billion for capital expenditure.

He further said that the country’s total public debt stock rose from N39.56 trillion in December 2021 to N41.60 trillion by the end of the second quarter of 2022, as revealed by the Debt Management Office (DMO).

He warned that the borrowings were significantly increasing, and Nigeria was struggling to service these debts due to revenue mobilisation challenges and an increased fuel subsidy burden.

These developments, the LCCI President said, were disturbing seeing that debt servicing alone was higher than actual retained revenue in the first four months of this year.

“There are already concerns that most, if not all, of the assumptions in the Medium-Term Expenditure Framework (MTEF) 2023-2025 will be missed as we continue to experience unprecedented levels of disruptions to supply chains and agricultural production.

“The 2022 budget assumptions have already fallen short in terms of inflation, exchange rate, and GDP growth rate and all of these assumptions have become inadequate.

“Nigeria’s Debt-to-GDP ratio now stands at 23.27 per cent, as against 22.43 per cent on Dec. 31, 2021.

“On the path of caution, we urge the Federal Government to discontinue this unsustainable pattern,” he said.

The industrialist acknowledged that the level of insecurity in the country had prompted increased spending on defence and security.

He said that the deteriorating security situation in the country had also battered investors’ confidence and affected foreign exchange inflows into Nigeria.

He stressed that with the high component of Eurobonds as part of external debt, the current weakening of the Naira signified an exchange rate risk likely to put pressure on inflation and its attendant consequences.

“Nigeria is the only major oil exporter that hasn’t benefited from the windfall of higher global oil prices.

“The International Monetary Fund (IMF) has warned that debt servicing may gulp 100 per cent of the Federal Government’s revenue by 2026 if the government fails to implement adequate measures to improve revenue generation.

“In the face of rising debt servicing costs accompanied by a dwindling revenue, the provision of critical infrastructure and amenities like healthcare services, education, power, roads, and security will be hard hit as funding shrinks,” he said.

He noted that recently, the Debt Management Office (DMO) listed N250 billion Sukuk on the Nigerian Exchange Limited (NGX) as an alternative financing source to bridge the infrastructure gap in the country.

He said the issuance and subsequent listing of the Sovereign Sukuk on the NGX platform aligned with the Chamber’s persistent call for cheaper government financing away from debts by leveraging innovative and cost-effective revenue sources.

“The Chamber has consistently advised the government to borrow from cheaper sources and consider deficit financing from equity instead of the expensive debts borrowed and used for recurrent expenditures.

“The commercialisation model proposed for NNPC Limited is the right direction to go.

“Once this plan succeeds next year, it should be replicated with other national corporate assets scattered across the country.

“Nigeria must manage its debt burden to avoid further pressure on revenue.

He said it was also imperative that more spending was needed in supporting productive infrastructure instead of spending borrowed money on subsidising consumption.

“Government must rethink its sourcing of debts and spending of borrowed funds,” he said.

Money market

Naira will continue to appreciate against dollar – Shettima

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Vice President Kashim Shettima has expressed optimism that the Naira would continue to appreciate against the dollar at the forex market.

Spokesperson of the Vice-President, Mr Stanley Nkwocha, in a statement on Saturday, said Shettima stated this at a meeting with officials of the Lagos Chamber of Commerce and Industry (LCCI), at the President Villa, Abuja.

He said President Bola Tinubu ended the fuel subsidy and ensured the unification of the multiple exchange rate because the former arrangement was producing billionaires overnight.

“Naira went haywire and some people were celebrating but inwardly we were laughing at them because we knew that we have the leadership to reverse the trend.

“Asiwaju knows the game, and truly the Naira is gaining and the difference will drop further.”

He recalled that the quality of leadership provided by President Tinubu as governor of Lagos laid the foundation for the massive development witnessed in the state.

Shettima assured that the Tinubu administration is doing its best to address challenges in the power sector.

According to him, Tinubu’s administration is aware that power is absolutely essential for development.

“We are determined to ensure that we generate jobs for our youths. Honestly, the President’s obsession is to live in a place of glory, to transform this country to a higher pedestal.

“He wants to leave a legacy, one of qualitative leadership because the hope of the black man, the hope of Africa rests with Nigeria.

“I want to assure you that President Bola Ahmed Tinubu is one of you. He understands your ecosystem. In this government, you have an ally and a friend.”

Earlier, the President of LCCI, Gabriel Idahosa, emphasised the need for the Federal Government to consider more innovations to address the insecurity challenge in the country.

He also urged the Tinubu administration to ensure a significant upswing in the pace and scale of alternative policy measures that promote credit access, stimulate investment, and support entrepreneurship.

“This could include targeted interventions such as concessional lending facilities, loan guarantees, and interest rate subsidies tailored to the needs of SMEs and key sectors of the economy like agriculture, manufacturing and power technology.”

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LCCI advocates discipline, export to sustain Naira appreciation

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LCCI advocates discipline, export to sustain Naira appreciationThe Lagos Chamber of Commerce and Industry (LCCI) has emphasised the importance of maintaining discipline in the foreign exchange market to sustain the steady appreciation of the Naira.

The President and Chairman of the Council of LCCI, Mr Gabriel Idahosa, made the call in an interview with newsmen on Wednesday in Lagos.

Idahosa praised the efforts of the Central Bank of Nigeria in imposing discipline, attributing the recent Naira appreciation to curbing speculative activities.

“On the monetary side, the CBN is doing it. The primary efforts should continue to impose discipline in the foreign currency market.

“The abuses in the foreign currency market were prevalent and most of the fall in the value of the Naira in the last six months is not because there was any sudden calamity in the Nigerian economy.

“It was primarily because of very reckless speculations, that people were just speculating in the dollar, they had nothing to export, nothing to import, they were just buying the dollar for speculative reasons.

“And once the Central Bank started to impose discipline in the foreign currency market, we saw the value of the Naira rising very quickly by stopping speculation,” he said.

According to him, the strategies of the Central Bank, now, are designed to achieve a sustained discipline in the foreign currency market.

Idahosa highlighted the need to continue reducing the number of Bureau de Change operators, stressing that many operated without contributing to international trade.

He applauded the Central Bank’s move to enforce documentation and identification of buyers and sellers at BDCs, aiming to deter reckless speculation and curb illicit financial flows.

On the fiscal side, Idahosa urged President Bola Tinubu to prioritise a nationwide export drive, citing it as the key to bolstering the Naira and providing essential foreign exchange.

He emphasised the importance of fostering a culture of export among Nigerians across all scales of enterprise to reduce reliance on imports and strengthen the country’s economic resilience.

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Foreign reserves decline to $32.29bn

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The foreign reserve has depleted to $32.29 billion, which is a six-year low in the Central Bank’s course to save the naira.

This is the lowest level the reserves have been since September 25, 2017, when it was $32.28 billion.

The country’s foreign reserves declined by 6.2 percent, losing $2.6 billion since March 18, when the naira started its rebound from record-low levels against the dollar to $32.29 billion as of Monday, based on the latest available data from the CBN.

At the beginning of the month, the reserve was at $33.57 billion, then further dipped to $32.6 billion by April 12.

This comes as the CBN has attempted to save the naira through various interventions such as raising interest rates to 24.75 percent and managing foreign exchange trades.

It stepped up its intervention in the FX market with sales at both the official market and to BDC operators who sell dollars on the streets.

The apex bank, which sells $10,000 to each BDC every week, mandated them to only sell at a spread of 1.5 percent, which comes to N1,117 per US dollar.

The rate sold by the BDCs has set a defacto floor for the naira in the black market since the apex bank resumed sales to them in February.

Also, last month the CBN said it had cleared a backlog of $7 billion since the beginning of the year. That was built over the years as the central bank pegged its currency against the dollar, leading to a scarcity of foreign currency that deterred foreign portfolio investment. However, it’s unclear how much dollar debt the CBN retains on its books.

Akpan Ekpo, a professor of economics and public policy, said the CBN’s managed float system in which it is trying to ensure supply and curtail demand is not sustainable in the long term.

He said the CBN needs to be careful with how it depletes the foreign reserves as its main source is oil revenue.

“We need to manufacture non-oil goods and services, export them, and get foreign exchange and not depend on oil income,” he said.

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