•Urges govt minimise insatiable borrowing disposition
•Seeks sectoral limits on public borrowing, bond issuance, others
James Emejo in Abuja
The Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture (NACCIMA), has expressed concerns over the burgeoning rate of public sector borrowing from domestic banking institutions which has continued to rise unsustainably.
The association said government’s involvement in the banking sector had resulted in a crowding-out effect, whereby private sector entities are currently “facing exorbitant barriers to accessing finance, which in turn stifles their capacity for growth and contribution to the national economy”.
The group’s position was contained in a letter dated March 13, 2024, which was addressed to both the Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun and the Governor of the Central Bank of Nigeria (CBN), Mr. Olayemi Cardoso, and signed by the National President, NACCIMA, Mr. Dele Kelvin Oye.
The association further noted that over-subscription of government debt instruments, at rates that eclipse the 21 per cent mark for treasury bills and even loftier premiums for state bonds, was “reflective of an economic milieu in urgent need of recalibration and judicious policy intervention”.
NACCIMA in its correspondence, titled, “Strategic Imperatives for Redressing Financial Disparities and Augmenting Economic Viability in Nigeria”, pointed out that while the association acknowledged the difficult challenges inherited by the current administration, “We also believe that opportunities exist for Nigeria to explore new ways of addressing the challenges of the current global economic climate”.
It stated that the current inflationary impact on economic stability and purchasing power of Nigerians, called for robust and multifaceted policy responses.
The group commended the efforts of the Finance ministry as well as the strides of the CBN to mitigate inflationary pressures.
The association however noted that “This must be underscored by a synergistic
approach where monetary policy is buttressed by prudent fiscal mandates.
“The CBN, in strategic alignment with the Ministry of Finance, must architect a cohesive blueprint to minimize the inflationary effect of monthly FAAC allocations and the insatiable borrowing proclivities of the public sector.
“Such a regime would release significant capital within the banking system, thus enabling more optimal allocation of resources and extension of credit to private enterprises at more competitive rates for entrepreneurial innovation and investment.”
NACCIMA proffered several recommendations to boost economic growth among others.
It said the CBN should consider multiple tools in addition to Monetary Policy Rate (MPR) and CRR to manage inflationary effect arising from increased FAAC allocations, adding that zero coupon stabilisation bonds and vouchers could be issued for FAAC allocations instead of cash.
The association said public and private sector liquidity management should be addressed on a sectoral basis, and called for the establishment of a robust forward pricing exchange rate mechanism to facilitate investment planning, stability and long-term economic prosperity.
It further recommended for sectoral limits on public sector borrowing and bond issuance as well as public sector debt repayments from excess FAAC allocations in order to
free up funds for the real sector.
It added that a public sector debt redemption programme will result in interest rate reduction as well as reduce aggregate borrowing costs for government.
The association also called for opening of a two-year window for corporate bond refinancing programme to enable refinancing of corporate borrowings at a lower rate.
It added that the customs duty exchange rate dilemma could be addressed by recognising Naira as the de facto national currency, stressing that customs duty should be charged as a percentage of the Naira value used to open a Form M.
