The Nigeria Employers’ Consultative Association (NECA) has again voiced its concern at the persistent alienation of the manufacturing/real sector of the economy from accessing capital at reasonable cost due to increased government borrowing in the domestic market.
Mr. Timothy Olawale, the director-general of NECA, at the weekend, stated that the private sector continues to be crowded out of access to capital at reasonable cost due to the volume of government’s borrowing in the domestic market.
“The assumptions of the 2019 budget show that government might borrow to finance the deficit in the budget. This is against the background that the Debt Management Office had earlier reported that the Federal Government’s domestic debt profile rose to N15.814 trillion in September 2018, from N15.629 trillion in June 2018 (1.19% increase).
The director-general averred that, ‘’the 2019 budget has about N1.86 trillion deficit and predicated on revenues in the range of N7 trillion. Both scenarios are threatened by disappointing revenue (notwithstanding the upsurge in the price of crude), which naturally feeds into a wider deficit that will leave government with limited options than to borrow, thereby further shrinking available credit to the private sector.’’
While acknowledging government’s effort in spite of the nation’s challenges, he said, “We recognise the multifaceted challenges facing government and commend its effort at meeting the yearning of the organised private sector. However, there is the urgent need for deliberate and not accidental policies aimed at channelling cheap credit to businesses, creating a favorable environment for enterprises to thrive and reduction of regulatory predatory tendencies. This will enable the private sector to create jobs and wealth for the teeming youths and provide opportunities for government to generate income.”
He stated that there was a correlation between the level of domestic credit available to the private sector (percentage of GDP), rate of job creation and inclusive growth. Data from the World Bank (2017) shows that Ghana (17.3%), Cote d’Ivoire (23.9%), Benin (20.4%), Togo (35.1%) and Kenya (30.0%), among other African countries, have a higher percentage of domestic credit available to private sector.
Olawale said the gradual reduction in unemployment rate and increase in job creation in these countries justifies the imperative of giving the private sector due attention.
He stated further, that “We must accept our limitation as an oil-dependent nation (rather than an oil-rich nation) that has refused to understand the unsustainability of our dependence on oil. Now is the time to give deliberate attention to the engine of development, the private sector, and support it to fulfill its task of wealth creation.’’