Government can address Infrastructure deficit through Debt financing- Expert

Written by Maritime First

Former Director-General, Debt Management Office (DMO), Dr. Abraham Nwankwo on Thursday advised Government on the use of debt financing, in addressing Nigeria’s infrastructure deficit. 

Nwankwo gave the advice while speaking on the topic: “The Realism and Paradox in Financing Nigeria’s Huge Infrastructure Needs” at the 2019 Annual Lecture of the “Just Friends Club of Nigeria (JFCN)” in Abuja. 

He observed: “In spite of the country’s problematic debt profile, a plan-based, project-tied, output-driven, and commercially-modelled and private-sector-managed debt programme remains a robust option  for financing Nigeria’s infrastructure development.”

“It is a solution that can be intelligently structured to produce a transformed and self-sustaining economy without worsening debt sustainability.”

He, however, said a major issue which had to be addressed while using debt financing for infrastructure was the impact of exchange rate risk.

According to him,   a substantial portion of Nigeria’s debt is obligated in foreign currency.

“Concerns about exchange rate risk and generally, concerns about the ability of a country that is a weak player in the global market to meet its external debt obligations are quite relevant.

“So, how can one justifiably propose more foreign currency denominated borrowing under this condition?.

 “The answer, however, lies in the Turnaround Plan.

“The essence of the financial and structural programming contained in the TP, is that within five to seven years, the implementation of the plan will have produced a sustainable and continuously strengthening economic progress.

“And that from about year eight to year ten, the economy will start generating adequate public revenue, including in foreign exchange, with which the external debt will be serviced and repaid. 

 “That is why the external borrowing for the purpose of achieving the turnaround will be at favourable terms including, particularly, a moratorium period and a long tenor,” Nwankwo said, noting that debt financing had the capacity to bail out existing debt un-sustainability, while improving long-run debt sustainability.

 While discussing on the role of media,  Mrs Eugenia Abu,  former Executive Director of Programmes, Nigerian Television Authority (NTA) called  for better media management in the country. 

Abu said for the media to be part of the narrative, we need to invest in our media. 

“Nigeria has not thought it fit to dominate the continent media wise,  our culture,  our food, our cloth are some of the best in the world and we do not propagate it in our media.

“We need to build the capacity of our media,  and until we do this, we cannot have a national conservative. 

“We need to build the role of the media in economic development by making them part of the narrative and until they are part of the narrative, they will continue to cover us whenever we have a conversation at the level of the opening ceremony, ” she said. 

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