The Senate has rejected the consideration of a request by President Muhammadu Buhari for a $29.9bn external borrowing rolling plan over a period of three years for some reasons they gave.
However, Abraham Nwankwo, the director general of the Debt Management Office (DMO), has said it was a wrong move by the senate. The Debt Chief urged them to approve President Buhari’s request for authorisation to borrow $30 billion (about N9.61 trillion), and do so quickly. Below are the reasons he gave:
1. Importance to economy Mr Nwankwo, who spoke on a Channels TV, gave his first reason stating that the loan was so important to help address the huge deficit in the economy and help pull the country out of the current recession. He state that the loan if approved will go a long way in pulling Nigeria out of the current economic doldrums and stabilize the country enough to start on a better foot.
2. Easy repayment According to Premium Times, another reason the loan should be approved according to the DG was that the $30 billion was actually for a three year-period, running from 2016 to 2018, to be repaid in 20-30 years’ time. With this arrangement, he said it would not be difficult for the country to repay the loan, after they had used it to solve existing problems in the economy.
3. Infrastructure Speaking on infrastructure, Nwankwo had this to say regarding the effect of the loan: “When you are in the kind of economic situation the country has found itself, you have to decide where you want to start addressing the problem. The most critical point to start is to deal with infrastructure problem. “If you deal with infrastructure problem, the cost of power, transportation and most other goods and services will be forced down on the long run. The development will have a significant impact on the price level in the economy.” He also explained that $10 billion would be spent per annum for three years, targeted at building infrastructure in all states of the federation, with the main focus on power generation, rail and road renovation and construction.
4. Low interest rate While highlighting some of the other attractive parts of the proposed loans by the president, Mr Nwankwo said that the low concessionary interest rate, at about 1.5 per cent, was different from previous loan arrangements which had happened under other administrtaions. He used the example of the Paris Club of creditors, which came with floating interest rates as high as 18 per cent, to buttress his point.
5. Social programmes Speaking on how the $30 billion would be spent, he said projects, with special emphasis on infrastructure development, were in the agriculture, health, education, water supply sectors as well as those to facilitate growth in the economy and employment generation, poverty reduction through social safety net programmes and governance and financial management reforms. With adequate infrastructure, he said the impact on the economy would be felt by all Nigerians, as the general price level which is the consumer price index measuring price level and the rate of inflation would be brought down.
In conclusion, the debt management chief said: “The way to go is to have adequate infrastructure, power road, transportation ICT. All these would make the cost of production in the economy much lower, while the cost of goods and services will be lower and inflation forced down. When inflation is down, monetary policy rate will be lower, translating to a lower lending rate.