President Buhari of Nigeria wants to borrow $ 29.9 billion to finance infrastructure projects.
President Muhammad Buhari had on October 25 written to the National Assembly seeking approval to borrow $29.9 billion to finance the nation’s infrastructure development from 2016 to 2019.
President Buhari’s letter said it had become necessary to resort to external borrowing to bridge Nigeria’s financial gap.
He added that the monies would be applied to key infrastructure projects including power, railway and road project amongst others.
Mr. Okunronmu said: “If the Federal Government borrows for development, it is good and realistic, but borrowing for consumption is counter-productive to the economy’’.
He said that borrowing for investment, not for consumption, would have positive impact on the economy and boost economic growth.
The ex-CBN director said the expected revenue in 2016 budget was not enough to cover the recurrent expenditure, so the government had to resort to depending on domestic and external borrowing.
Some Nigerians might not like President Burahi’s decision to borrow. You will recall that last year, the President was criticised by the oposition party, PDP of planning to borrow at least N5 billion per day to finance the N6.08 trillion 2016 budget. Some reasons for this critisim were hightlighted in an article published by Premium Times:
The spokesperson of the party, Olisa Metuh, who spoke with reporters on Tuesday in Abuja, said a breakdown of the N1.84 trillion to be borrowed by Mr. Buhari to fund the budget shows that Nigeria would be borrowing N5 billion a day for the next 365 days, starting from January I, 2016, without corresponding provision for economic production and a clear repayment plan.
“Some people may be wondering why we raised an alarm about the budget. The reason is simple. When we analysed the budget, we discovered it is a misshapen attempt at a Keynesian economics of applying deficit spending to stimulate growth even when studies have proven that GDP growth rates decrease by over 50% when debt goes from low or moderate to high. But then we know the borrowing here is to pay huge campaign debt and fund a political war chest.
“By every standard, this budget is a booby trap against the nation. When you break down the proposed N1.84 trillion borrowing, you discover that it amounts to borrowing N5 billion every day for the 365 days in 2016. The questions are: for what specific projects are they borrowing N5 billion per day and how do they intend to pay back?” Mr. Metuh said.
The PDP spokespersons said Mr. Buhari should explain to Nigerians how his government intends to pay back the loan.
“Is it by continuous borrowing to service the interests, and does he intend to accumulate colossal debt for future generations of Nigerians?
“The truth is that this administration cannot justify this proposal. There is no known economy in the world where you can justify borrowing N1.84 trillion without specific projects and precise repayment outline.
“This is worse still in an oil-driven, mono-economy at a time crude oil is selling at $30 dollars per barrel and is speculated to go down to about $20 dollars or even lower in the next one year. The idea can only come when you diversify the economy and boost production capacity in manufacturing and other critical sectors, a direction, which the budget clearly failed to provide. Read Full article here
Everyone will agree that these are indeed difficult times for Nigeria and of cause for Mr President.
Whether President Buhari goes on with borrowing the funds or not, I guess most residents of Nigeria can only hope for the economy to get better as we get to the end of the 2016.
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