What options should FG explore aside from $30bn loan?

• Prof. Simon Irtwange (National President, Institute of Chartered Economists of Nigeria)

 

I think the available option, which the labour will go against, is the selling of national assets. There are some of these assets that are unproductive, no matter how much money the government put into them. For instance, Former President Olusegun Obasanjo put so much money in the refineries but nothing came out of them. If you have three vehicles, for instance, and you have a challenge in the family, the normal thing is to sell one or two cars and solve the problem. And when you bounce back, you can get better vehicles.

I think with proper engagement, the government can list all the assets and sit with the labour union. They can agree on which assets should be sold and the ones that shouldn’t, so that the money realised can be used to pull the country out of recession. I think it is good that we have things that we can sell to solve the problem rather than look for loans. At times, the people you expect loans from would not see you as being serious when they know you have assets with which you could raise funds. At times, it is better to look inwards in solving problems.

Diversification is also important but it may be a long-term measure. We have lost out on this but it is better late than never. A country like the United Arab Emirates has already taken advantage of oil money to diversify her economy. Israeli economy is built around agriculture and tourism. So, I think if we develop our agricultural sector very well, it will help greatly.

• Prof. Sheriffdeen Tella (Lecturer, Department of Economics, Olabisi Onabanjo University)

The first thing is for the government to prioritise its projects. They have to identify the main projects they want to do. The second thing is for them to look at the option of domestic borrowing and partnering international organisations. Many countries want to partner us. If we have a national planning, we will be able to show them the areas we want them to key into. Allow people to participate in production and distribution of energy by unbundling electricity. With this, foreign investors can be allowed to use different means of generating electricity such as coal, gas and wind. Some of these investors have the required technology.

Highways can be constructed on the basis of collaboration with the private sector. Nigeria will be ready to pay for tollgates once the roads are good. When the government removes these major projects from what it wants to do, it needs less money to do some other things. We have to realise that we cannot continue to live big when we know that we are small. The government cannot continue to run budget as if there is no problem. The government should bring down the budget, concentrate it on the areas of need and stop coming up with excessive budget that it would not be able to operate.

So, government does not need to borrow $30bn. If they must borrow, they need less than $10bn. The government also needs to unbundle agriculture and let people who are interested in it participate, whether they are Nigerians or not. The Israelis might be interested in agriculture. If they are allowed to come in and are allocated land, they will produce. Government should give people the opportunity to participate in the economy but there should be regulations.

• Kunle Ezun (Currency Analyst, Ecobank Nigeria)

The options available to the government are quite limited. Top on the list are borrowings via Eurobond and domestic debt (FGN bond and treasury bills). While the domestic borrowing is about N10tn ($34.5bn) as of June 30, 2016, the external debt borrowing component is about N3tn ($11bn). This provides a borrowing space, and perhaps a major reason the government is exploring the external borrowing space to fund the budget and regenerate the economy. Meanwhile, the $30bn borrowing plan is over a period of three years, which the government may not necessarily access, if the earnings capacity of government improved over time. The other options are assets sales and ploughing back the recovered loot into the economy. But is the quantum of the amount of the recovered loot enough to generate the economy? I don’t think so. The government can’t just avoid external borrowing.

• David Adonri (Chief Executive Officer, High Cap Securities Limited)

The $30bn loan is unnecessary. Right now, the major problem that is causing economic recession and high inflation rate is because the productive sector is not producing to its full capacity. So, where money is required now to move the economy out of recession is the real productive sector. This means the government needs to come up with appropriate policies and programmes.

The infrastructure the government wants to put the $30bn into could be financed with local revenue if the productive sector is made to increase its activities. The sector could be improved if the government pursues market-based policies. This would enable domestic and foreign investors to be attracted into investing in the economy. The private sector could put the infrastructure in place and commercialise it and it becomes a source of revenue for the government.

It is a misdirected thought for the government to continue to look for $30bn loan, which at the end of the day they may not utilise optimally. We have to change our policy from having a government that would be using money to execute projects that the private sector can efficiently and profitably execute. The government should come up with policies that will stimulate private sector-led investment in the economy.  They should also negotiate to end the crisis Niger Delta so that oil revenue can increase.

• Prof. Leo Ukpong (Lecturer, Department of Financial Economics, University of Uyo)

Our economy is very weak and our ability to repay debt in terms of credit rating is poor. If we collect a loan, the interest rate will be very high and it would create a problem in the future – in terms of payment. The money we could have used for something else would be going more into debt payment. Debt is not bad if you are sure you can use it properly and repay it without sacrificing the future of the next generation. Unfortunately, the opposite is Nigeria’s history of debt servicing.

The Federal Government can truly look into the things they have been spending money on which are not necessary and cut down on those expenditures. They can realise half of that $30bn from prudent trimming of unnecessary expenditures. We have too many bloated expenditures at both federal and state government levels. President Muhammadu Buhari administration has been pursuing the recovery of looted funds but the government has not given an account of what has been recovered. In a way, recovered funds can be used as an alternative to borrowing.

• Johnson Chukwu (CEO Cowry Asset Management Limited)

The major thing we need to do to bring the country out of recession is to return the local currency liquidity to the market system so that local productivity will pick up. Today, local businesses are shutting down because they lack adequate liquidity. In a period of inflation, you cannot continue to suck up liquidity out of the banking system, thereby denying the production sector the liquidity they need to do business. So, we need to address this by doing two things. We need to reduce the cash reserve ratio from the current 25 per cent to 15 per cent. There is also the need to release the Treasury Single Account back to banks so that banks can have liquidity to resume their intermediation role and produce for the local economy.

The Federal Government needs to access funds to the tune of N15bn to restore the liquidity in the market in the short term. This funding, which can come from the budget support line, must be followed with concession of critical assets that the government does not have money to do. The private sector will come to those sectors and inject long-term foreign currency liquidity into the economy. Such concessions could be some of the expressways and airports.