The Federal Government on Wednesday said contrary to concerns being raised on the nation’s debt profile, Nigeria is not borrowing enough and that it is in the best interest of the country to borrow more.
The Minister of State for Finance, Dr. Yerima Ngama, said this while briefing State House correspondents on the outcome of the weekly Federal Executive Council meeting presided over by President Goodluck Jonathan.
Vice-President Namadi Sambo was absent at the meeting because he is currently in Brussels, Belgium, attending the International Donors Conference on the Development of Mali organised by the European Union and the Mali’s transitional government.
Ngama addressed journalists alongside the Minister of Information, Mr. Labaran Maku; and Minister of Water Resources, Mrs. Sarah Ochekpe.
He said the council approved a medium-term debt management strategy, which will run till 2015.
Ngama added that the strategy would make the federal and state governments to create opportunity for members of the Organised Private Sector to access more credit.
He said, “This strategy is being put together because of the current situation we find ourselves as far as the structure and level of our debt is concerned. The structure of our debt is not optimal. The bulk of the debt of our country, in fact 80 per cent, is domestic and only 20 per cent is foreign.
“And, then, the level. We have a total of over N6tn worth of debt; however, it is not just the level but the cost of servicing that debt. Nigeria has one of the highest interest rates in the developing world, and if there are high levels of debt, then debt servicing will become very expensive.”
The minister said in presenting the strategy to FEC, the Ministry of Finance suggested four options of long-term borrowing that could be used to pay short-term debts; long-term borrowing that could be used to pay long-term; accessing of concessionary windows as well as borrowing outside to pay domestic debts.
He said the problem with Nigeria’s debt was the high rate of servicing it.
Ngama said, “Nigeria’s debt is about 18 per cent of the nation’s GDP. The nation is under-borrowing. The standard is 40 per cent of GDP; it is when it is over that that there is a problem.
“We should borrow more, considering our economic activities. There is no problem with the level of our debt. The problem is the domestic debt.
Interest rates are too high. Yes, we must continue to borrow. It is only poor people that do not borrow. Dangote and others borrow; you can borrow once you are credit worthy. America is the most indebted country in the world. Borrowing is good. The more money you have, the more money you need. There is nothing like satisfaction.
“If we are not oil rich, nobody will lend to us. We are borrowing because we have many projects.”
Ochekpe, who had earlier presented her ministry’s 2012 report to FEC, said out of the N79.34bn appropriated for the ministry in 2012, N43.68bn was cash-backed, while N43.66bn was utilised.
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