Nigeria on the Road to its Worst Debt Trap, Says Don

Dike Onwuamaeze

A Professor of Economics and Head, Innovation and Technology Policy Department, Nigerian Institute of Social and Economic Research (NISER), Ibadan, Professor John Adeoti, yesterday raised the alarm that Nigeria is rushing headlong into its worst debt trap ever.

Adeoti stated this when he delivered the keynote address at the Institute of Chartered Accountant of Nigeria(ICAN)’s 2021 Mid-year Economic Discourse” titled, “X-raying the Nigerian Economy: Problem and Prospects”

Adeoti also warned that Nigeria must prioritise productivity within its economy above fixation with macroeconomic management and also watch the fast rate of its population growth.

He said: “The debt burden, especially the foreign debt in particular, is going to lead us into big debt trap worse than what we have ever experienced,” adding that “some of us economists will say what the problem is with concessionary low interest rate loans as any rational businessman will do that? Why can’t we continue on this at least to balance the budget deficit and to ensure that we build infrastructure?

“My own response to that is that it does not always work like that. If you will continue to borrow and the project you finance cannot service the debt, then you are planning for trouble. If we borrow for projects that will finance their interest repayments that is okay. But all of us will know that what we are doing currently and what we have done many times over the years is far from that. So, it is a big problem for the economy in spite of what Economics’ textbooks say about how investments should be done. That you borrow to invest and with the return on investment will pay-back.”

Adeoti also said that Nigeria should prioritise production above macroeconomic stability even though macroeconomic management is important in modern capitalist economy.

He said that the country’s focus should be on how to keep production going across sectors while dealing with macroeconomic variables like inflation, exchange rate, monetary policy.

“The focus should be how do we prioritise production.

“Many of the issues that we are dealing with in our economy is because we have a big production challenge.” “The economies that break the jinx of poverty right from the time of the industrial revolution are not economies that were fixated with macroeconomic management. Is it China, South Korea, Singapore in modern times? Macro management is good to tame inflation and ensure that exchange rate volatility is put at bay. But for God’s sake let us do anything that will help us to move production forward across sectors. When we do that, and eventually diversify, we will be able to create jobs and even the financial system will get stabilised. Getting production right is a major issue that everybody thinking about Nigeria’s economy should focus on.

“When we do not get production right, there is no way we can grow the economy. There is no way we can have economic transformation. If we get production going inflation will go up for some time but by the time production boosts inflation will calm down,” he said

The President of the ICAN, Mrs. Comfort Olu Eyitayo, said in her welcome address that Nigeria “is undoubtedly facing profoundly challenging times. The distortions in social, political and economic dynamics call for unconventional models for addressing the seemingly intractable national problems. The security challenge is assuming a worrying dimension every day, the volatility in the foreign exchange market is impacting businesses negatively, high inflation rates are making nonsense of investors’ decisions, low-level of budget implementation and monitoring have resulted in poor living standards, the infrastructural gap has made meaningful development a mirage, among others. Proffering feasible recommendations is the responsibility of all of us here and this summarises the essence of our virtual gathering this morning.”

The First Deputy President of ICAN, Dr. Innocent Okwuosa, said that while the participants were fully aware of the modest efforts of leaders across all strata of government in the country, “there is undoubtedly the need to significantly improve socio-economic indices and ensure that growth and development are broad-based. At this discourse, we would provide deep insights into the various dimensions of welfare and recommend practicable solutions for repositioning the country on the path of sustainable growth and development. At the end, I am confident we would have developed feasible recommendations for the different stakeholders in our journey to economic recovery and the building of a resilient economy.”

An Economist and former Director General of the Lagos Chamber of Commerce and Industry (LCCI) called for the “development of industrial parks, curbing smuggling, patronise of made in Nigeria products and governments deliberate support for indigenous industrialists with special incentives.”

The Founder of BudgIT, Mr. Oluseun Onigbende, called for spending efficiency by cutting workforce, centralising operational costs, capital fund efficiency and consolidation in order to improve the country’s budget performance.