More loans will risk Nigeria’s economic growth, experts warn

Nigerian government has been warned of the danger in obtaining loans, indiscriminately, from international financial institutions with which to fight recession.

The negative impact of the policy quite outweighs any gain to the economy in future, experts at different fora have stated.

According to them, randomly securing loans will not quicken recovery of the economy, but will rather mortgage its control to forces outside the country.

Some of the submissions by the economic experts were made in their bid to find lasting solution to the current economic meltdown that Nigeria is passing through.

The federal government was said to have, after obtaining a $1 billion lifeline from the African Development Bank (AfDB), meant to help it address the N2.2 trillion deficits in the 2016 budget, approached the IMF/World Bank and European Union for more loan facilities.

But a renowned business manager and chief executive officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, at the October 2016 monthly executive breakfast meeting at the Lagos Business School (LBS) said the country may soon discover that it is heading to a debt-trap situation, whereby it may never come out of debt servicing in a long time to come.

He said however, that if the government stopped at its present stage of its loan prograrmme, Nigeria would still fall within the healthy debt stock ratios.

Read also: Nigeria’s export trade drops by 29.7% in 2016 Q2

Another expert, Geoffrey Oyekanmi of the Economic Summit Group, at a seminar by accountancy professionals, in Abuja, raised the same alarm over Nigeria going after various countries and institutions for loans for the 2016 budget.

“Some of us are even wondering whether there will ever be another budget, given the over emphasis that is being laid on the current budget,” he said.

Oyekanmi said Nigeria should not go for the IMF loan, irrespective of any good conditions that it may be coming with.

But the Debt Management Office (DMO) said the federal government debt as at June 2016 was N13.79 trillion, which may double by the end of the fourth quarter.

Publications by an international rating agency, Fitch, indicate that Nigeria had already reached its loan profile expectation ratio (LPER) of 1.5 per cent of its GDP by June 2016.

It blamed the inability of policy makers to manage foreign currency inflow for the recession that has now taken over the country’s economy.

According to the outfit, invisible sector accounted for the 33.5 per cent of foreign exchange disbursed in 2016.

The experts further identified fiscal imbalances, leakages, low investment as well as rent seeking as some of the factors causing huge debt servicing costs in the country.

By Emma Eke….

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