Finance ministry, DMO in fresh row over role of loans in fighting recession

What looks like s fresh faceoff has resurfaced among top government functionaries on the best approach to an earlier end to Nigeria’s recession and the role of local and international loans.

The CBN Governor,Godwin Emefiele and Finance Minister, Kemi Adeosun have only recently just reduced attacks on each other on the question of retaining high interest rate and inflation in the recession period.

A very competent source said the current issue centred on the role local and foreign loans could play in seeing the county come out early from its present economic meltdown.

According to him, while officials from the ministry of Finance and Budget Office are on the side of unfettered terms in borrowing money to fund the 2017 budget proposal already transmitted to the National Assembly and other programmes, the Debt Management Office (DMO) and the Central Bank of Nigeria were on the side of limiting the volume.

But a greater part of the third week in October 2016 was said to have seen the various experts from the various offices holding different positions on the issue of loans.

For instance, while the Finance Ministry is of the opinion that there should not be any limit on the volume of loans for the country until the recession is over, the DMO has insisted that such loans should be pegged at not more than $22.08 billion for 2017.

This is in parity with the 2016 budget having $2.2 billion deficit that has seen Nigeria scampering for loans from both local and international financial institutions and countries.

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The debt office at the last meeting of the experts on Friday handed out a document tailoring the timetable and limitation for loan servicing for 2016 and 2017, putting the domestic borrowing at $5.52 billion and external borrowing at $16.56 billion.

It further stated that the maximum amount that could be borrowed in 2017 must be such that it will not violate Nigeria’s “specific threshold” of $22.08 billion, representing about 5.89 per cent of the country’s GDP.

The DMO said its “debt management strategy, between2016-2019, provides for rebalancing of the country’s debt portfolio in line with projection of a country in a recession.”

Said Raphael Bruno, of Price Waters, an expert on financial matters: “What is actually important is what the loans are borrowed for.

“But if they are for paying salaries and servicing old loans , it is not worth it, but they are for known development projects, that fall within capital programmes, Nigeria cannot do whiteout them if it wants to come out of the recession early”‘ he said.

By Emma Eke….

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