Dike Onwuamaeze
The Director General of the Budget Office for the Federal Republic of Nigeria, Mr. Ben Akabueze, has dismissed claims by members of the organised private sector that the federal government should explore more interest-free loans for financing its budget deficit, describing it as a mirage.
Akabueze pooh-pooheded the claim in his contribution during the Lagos Chamber of Commerce and Industry (LCCI) session on: “2022 Budget Analysis for Business Intelligence: What the Figures and Policy Statements mean for Business.”
Earlier in his welcome address, the President of the LCCI, Dr. Michael Olawale-Cole, had drawn the federal government’s attention to the need to watch the rising recurrent (especially personnel) public expenditure since, “it is more sustainable to empower the private sector to create jobs while the government creates a thriving business environment,” adding that “the chamber wishes to reiterate our concerns about debt costs. We need to re-assess our debt sources to borrow at lower rates or access more zero-interest loans like the Sukuk.”
But Akabueze countered Olawale-Cole suggestion.
He said: “First, the President of the LCCI talked about resort to interest -free options. The truth is that there is no such thing. All of that is a mirage. Whether it is Sukuk, if it is not called interest it is called something else. It is not going to be cost free.”
He also explained that the recurrent expenditure of N6.9 trillion consisted largely of N4.1 trillion personnel cost for about 1.5 million federal public servants at an average cost of N2.7 million per personnel, which is much lower than what is obtainable in the private sector.
Akabueze also clarified that the 2022 budget was not silent on reforms that could attract investments into the economy as claimed by the Country Senior Partner KPMG Nigeria, Mr. Kunle Elebute, during the session.
He said: “In this budget, provision has been made for fuel subsidy only up to June 2022. Beyond that date there will be no longer subsidy. This budget makes provision for power sector reforms that will achieve cost reflective tariff by the end of the year,” adding that, “GDP growth is not only driven by infrastructure investment. There is empirical evidence that show that investment in good healthcare can be more impactful in terms of GDP growth.”
However, in his presentation, the Chief Executive Officer of Economic Associates Limited, Dr. Ayo Teriba, advised Akabueze not to dismiss the suggestion made by the private sector that the government should explore non-interest alternative borrowing.
Teriba said: “He should not dismiss it as a mirage. It is not a mirage. And the key question here is what sort of debts are we issuing? In 2020 debt interest cost was more than the revenue of the federal government.
“In 2021 it was N1.2 trillion out of the N5.5 trillion. That is a failure of debt management when you have to surrender the country’s annual revenue on interest payment.
“There are non-interest alternative whichever way that is defined. We even issue the most expensive type of public borrowing instruments both home and abroad. These are junk bonds. We should try to improve the quality of the instrument we issue.
“Saudi Arabia in the past one year issued $50 billion in Sukuks. The Saudi government is not paying a dime interest rate on its debt. We are not going to look at Saudi government’s budget and find interest payment.
“The Sukuk does not even allow you to pay interest anyway. The profit on the instrument is going to be yielded by the underlying assets itself. So it is a financial returns and their risk whether they get the profits or not. Seeking non-interest fund will be a big relieve on Nigeria as a country.
The CEO of Financial Derivatives Company Limited, Mr. Bismarck Rewane, in his keynote address noted that that Nigeria has high income inequality that should be reduced to avoid violence and high rate of crime in the country.
He identified the telecoms, trade, agriculture, light manufacturing, financial services and transport and constructions as sectors that would drive growth in 2022.
He, however, said that policy reversals, social discontents and unrests are among the risk factors in the Nigerian economy.
