Contrary to insinuations that the Federal Government plans to use borrowed funds to finance recurrent expenditure, which involves payments of salaries. The Director General of the Debt Management Office (DMO) Dr Abraham Nwankwo said the external and internal borrowing will be 100 percent for financing capital projects across the country.
Dr Nwankwo disclosed this in Lagos at a one day workshop organised for members of Capital Market Correspondents Association of Nigeria (CAMCAN), with the theme Public Debt And The Challenge of Financing Nigeria Economic Recovery. According to him, based on the 2016 passed budget the government is going to borrow N900 billion external and N984 billion from domestic environment.
He said the logic behind external debt is because it less costly, adding that the problem of economic recession caused mainly by unfavourable structural change in the global market for oil and gas has affected government earnings and the fact that our tax base is still very low at 7 percent when compared with other economy that is 18 percent.
Dr Nwankwo said the goal of the budget is to turnaround the economy through diversified, self-sustaining growth in agriculture and agro processing, solid minerals, manufacturing and Information and Communication Technology (ICT). Thereby addressing the huge infrastructure deficit, speedily and effectively, power, road and rail transportation, as well as social infrastructure such as education and health care.
To actualize all these projects, the DMO boss who is also a member of the economic management team pointed out that the country will need about USD 25 billion per annum in the next 5-7 years.
Therefore, the imperative is to depend on well structured, substantial, affordable, long-term external debt financing to fund the desired Long-term Economic Change.
He said long term debt financing of sustainable economic recovery and growth is feasible because of the abundance of idle economic capacity in Nigeria, such as geography and ecology, agriculture, solid mineral, oil and gas reserves favourable to a flourishing petrochemical industrial economy. Housing, water supply both for domestic, industrial and agriculture, power, stock market capitalization and internal market.