NLC expresses concern over Nigeria’s debt profile, warns against further borrowing

The Nigeria Labour Congress (NLC) has urged the Federal Government to be cautious on the issue of borrowing both within and outside the country.

Dr Peter Ozo-Eson, NLC General Secretary, said this in an interview with News Agency of Nigeria on Monday in Abuja.

“We now owe a debt stock in excess of N24 trillion which is quite excessive. We can take comfort that we are not excessively breaking out of the guidelines.

“However, we take the view that it is not just the technical matter of the debt to GDP ratio alone that we should be focusing on, more importantly, we should be focusing on debt service burden.

“The amount we spent to service the amount annually can then become a major drag on the annual budget and that is the situation we are worried about.

“Borrowing in itself is not bad if you deploy a borrowed fund to generate the capacity to service such loans. So what is crucial is the utilisation of the cumulative borrowing, that we have done,” he said.

Ozo-Eson explained that the Federal Government has continued to borrow to finance infrastructure.

“We want a situation in which borrowed funds are quickly used to execute projects that have the capacity to generate income.

“If you use the fund judiciously and quickly create railway infrastructure between two major towns and you run those rails efficiently and commercially, you should be able to service that loan from the proceeds that are then generated from the rail service.

“I am not sure we are matching borrowing to match our specific projects so that we can expect those projects to run in a way to service those loans. I think these are things we need to start focusing on.

“Take for instance, the rail service between Kaduna and Abuja, it is booming due to the complete collapse of security on the highways.

“Now we also hear of syndicates that are now taking advantage and there are manipulation of tickets and things like that; those are haemorrhages.

“We need to manage this such that it can generate sufficient fund that can be used to service what loan went into its own creation,” he said.

Ozo-Eson said that Nigeria must be creative to ensure that the loans are sustainable.

“I think that we need in a creative way to do this kinds of things for those loans to be sustainable.

“We should be careful not to be back to those days, so that debt overhang will not become a major drag on our capacity to finance development,” he said.

In April 2006, Nigeria became the first African country to fully pay off its debt owed to the Paris Club.

The Paris Club is a group of officials from major creditor countries whose role is to find co-ordinated and sustainable solutions to the payment difficulties experienced by debtor countries.