N19tn Debt: Financial Experts Caution FG

N19tn Debt: Financial Experts Caution FG

Economic and financial experts have cautioned the Federal Government on its plan to borrow money again, calling it to spend more on capital expenditure instead of borrowing.

A professor of Political Economy and management expert, Pat Utomi and The Chief Executive of the Financial Derivatives Company Limited, Bismarck Rewane spoke on the implication of the N7.1 trillion rise in nation’s debt in just two years.

Currently, the debt stands at N19.16tn as of March 2017 and according to Utomi, the government is not supposed to be comfortable with the debt profile.

He said “A country is not different from a household, more or less generally, in terms of how it manages its finances. So, if your personal debt profile is going up at that rate, will you be comfortable?

Utomi expressed fear that the impact of the borrowing might not reflect on output because a situation where the debt ballooned, the country would not be able to manage it due to lack of necessary stimulation of production.

To Rewane, government borrowing is becoming outrageous and it is wrong that the government borrows mainly to support recurrent expenditure.

“We need to move away from debts for recurrent expenditure to debts for capital expenditure, which is projects-specific,” he said.

He explained that borrowing itself might not be bad but how to service the debt is what could result in burden.

“We are using 66 per cent of our independent revenue to pay interest. So, interest rates must come down substantially, or else, we are in trouble,” he noted.

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