Moghalu Advocates Cut In Govt Borrowing


Former deputy governor of the Central Bank of Nigeria (CBN), and presidential candidate of the Young Progressives Party (YPP), Prof. Kingsley Moghalu, has called for a cut in the level of government borrowing.

Speaking at a virtual conference organised by Elombah Television over the weekend, Moghalu, while responding to a question on Nigeria’s eligibility to take more loans, said the federal gov- ernment, as a matter of urgency, needs to reduce the cost of governance and stop borrowing.

According to him, “Governance failures seem to make the government think it has no choice but to take more loans. I am not condemning loans total- ly, there are times when a nation has to borrow but the question is, what do you do with what you borrowed and the terms on which you borrow?”

Appealing to the federal government to cut its coat according to its cloth, he said, the country keeps borrowing because it fails to take hard decisions, not- ing that, “We want to continue to maintain a bloated governance and civil service so that the government would be popular with the people.

“Are there no ways of financ- ing construction of rail, roads in Nigeria through public private partnership (PPP) arrangement? I think the Nigerian government needs to move much more along the lines of PPP rather than borrowing to say they are constructing infrastructure. I think it is time to take a more sensible and longer-term approach to these things.”

The major problem, he stressed, is not just Nigeria’s loan to China but the broader external indebtedness as Nigeria is essentially walking into a sovereign debt crisis, considering the fact that the country now spends virtually all that it earns servicing foreign debt.

“In Q1 2020, federal government total revenues was about N950 billion but we spent N943 billion servicing external debt which is about 99 per cent. Is a country on this path fiscally viable? I think not.

Yet, we are taking more and more of these loans even though, we are told by the Debt Management Office (DMO) that our debt to GDP ratio is under control and that, it is below 30 per cent but that doesn’t matter,” he stated.

Speaking further, he said: “What matters to a country like Nigeria is the debt service to rev- enue ratio, especially, because our tax to GDP ratio is very low.

90 percent of our revenue is from crude oil and so, when those rev- enues are plunging, then that is a huge risk because your debt obligations are fixed.

So, if there is such a serious mismatch between what you are earning and what you have to pay those you are owing, then you have a crisis. And that is the real problem for Nigeria today with its loan from China.