Says delay in formation of cabinet affected economic growth
The Centre for Democracy and Development (CDD) has cautioned President Muhammadu Buhari against plunging the nation into further debt, saying the continuous accumulation of debt appears unsustainable.
It said servicing of the debts is already accounting for more than 60 percent of government revenue.
The advice was contained in a report released by the organisation on Wednesday in Abuja titled “Fluctuating Fortunes: A 5-year Economy Assessment under the Buhari Administration”.
According to the report, the nation’s debt burden is expected to further increase in 2020, especially if government fails to be more decisive in its debt management policies.
The report argued that the inability of the federal government to implement robust policies to salvage the fiscal situation and the six months delay in deciding the cabinet paved way for an economic crisis in 2016.
It noted that the high rate of unemployment and increased poverty partly triggered the security challenges in the country, which was a key campaign promise of the President.
CDD said: “The assessment informs that in the period under review, unemployment rate was high among youths, as about 5.3 million youths within the age bracket of 15-24 could not get a job in 2015.
“In addition, the report refers to how lower government revenue resulting from the “twin shocks” (COVID-19 and Oil) will further saddle Nigeria with a huge debt burden. The point is made with clarity about how the federal government borrowing has grown by more than 100 percent since 2015. Although federal government’s current debt stock of about N22 billion is less than 20 percent of GDP, the continuous accumulation of debt appears unsustainable as servicing of the debts is already accounting for more than 60 percent of government revenue.
“The wobbly shape of the economy, according to the report is further underscored by the recent downgrade in Nigeria’s credit rating by key international credit agencies (S&P and Fitch) in the first half of 2020. It was argued that with the twin shocks resulting from global oil glut and the COVID-19 pandemic, the country’s debt burden is expected to further increase in 2020 especially if government fails to be more decisive in its debt management policies.”
“Similarly, the double-edged impact of the decision to close the borders in August 2019 was described as an attempt to boost local production, yet the closure had undesirable effects in terms of stifling the trade sector and causing inflation. The assessment notes for instance that food inflation increased from 11 percent in August 2019 to 15.03 percent in April 2020; while trade, which is a major component in the services sector and the second-largest employer of labour, contracted by one percent in the second half of 2019.”
It however applauded the president for some initiatives ranging from the Presidential Enabling Business Environment Council (PEBEC), implementation of the Finance Act 2019, which was described glowingly as a policy game changer and the Anchor Borrowers,’ scheme which the organisation said reportedly contributed to the improvement in food availability across the country.
The report advised the Federal Government to reduce the quasi-fiscal role of the Central Bank of Nigeria, improve credit infrastructure, leverage digital technologies to embrace open governance principles, and make good on plans to invest significantly in human and physical capital, while addressing long-term bottlenecks to growth.
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