By Merit Ibe
The Lagos Chamber of Commerce and Industry (LCCI) has emphasised the need for creation of a national asset register, and a coordinated mechanism in place for valuing and managing Nigerian assets.
This was even as the chamber lamented that government’s penchant for issuing new debt to redeem maturing ones is not an optimal debt management strategy.
President of the chamber, Toki Mabogunje, who made the remark yesterday in an address on the state of the economy, said it was critically important to replace existing debts with asset-linked securities to reduce debt cost.
She said that would ease the pressure of debt service on the budget.
Noting the Presidency’s approval of the Medium-Term Debt Management Strategy for the period 2020-2023, Mabogunje said the chamber’s position is that debt-to-GDP ratio does not reflect underlying sustainability risk(s) particularly in developing economies such as Nigeria, where there is a weak correlation between GDP and revenue.
She explained that in Nigerian context, agriculture and distributive trade – the two largest contributors to GDP – have no significant contribution to revenue to support servicing of debt obligations.
“While public debt stock accounted for some 22 percent of nominal GDP as at end-December 2020, below the 56 per cent threshold recommended by the World Bank and the IMF for developing countries, official statistics points to Nigeria’s weak fiscal position with average debt costs to revenue ratio settling at 59.4 per cent between 2015 and 2020.”
Mabogunje said that portends serious medium-term fiscal sustainability risk given the country’s persistent revenue challenge.
Acknowledging Federal Government’s drive in boosting revenue mobilisation via the Strategic Revenue Growth Initiative (SRGI), the chamber highlighted the need for state governments to be innovative about revenue generation.
“We note that majority of Nigeria’s debt are not linked to assets or specific projects. As such, it is critical to create a national asset register, and have a coordinated mechanism in place for valuing and managing Nigerian assets.
On the exit from recession, she said it is instructive to note that exit does not imply an end to Nigeria’s numerous economic woes. Growth, she noted, remains fragile, and the economy is faced with several challenges including rising consumer prices, weak employment level, lingering liquidity concerns in the foreign exchange (forex) market, depressed purchasing power, weak investor confidence, persisting external vulnerabilities and security concerns, among others.
“These challenges which were part of the country’s economic narrative prior to the pandemic, were amplified by the pandemic. The Chamber notes the further increase in unemployment rate from 27.1 per cent in the second quarter of 2020 to 33.3 per cent in the fourth quarter…”