Following the commentaries at the backdrop of the positions taken at last week’s Monetary Policy Committee (MPC) meetings of the Central Bank of Nigeria (CBN), a new wave of concerns over the economy appears to be on the front burner.
The CBN Governor, Mr Godwin Emefiele, had warned that the economy might be headed for a reversal of the recent uptrend it recorded in the key parameters especially the Gross Domestic Product (GDP). He had based his concern on the excessive borrowings by the Federal Government which have thrown double adversity in the way of real growth.
First was the crowding-out of the private sector in the quest to finance for business development and reflation of the economy. The second borders on the sustainability of the debt profile contrary to the argument in favour of more borrowing championed by the Debt Management Office, DMO, and its agents.
Emefiele had stated: “MPC was seriously worried over the increasing indebtedness of the Federal Government, which resulted into N2.51 trillion deficits in the first half of 2017. The MPC noted the widening fiscal deficit of N2.51 trillion in the first half of 2017 and the growing level of government indebtedness and expressed concern about the likely crowding-out effect on private sector investment.”
At the rate the government is going it is obvious that the deficit would be around N5.0 trillion by end of this year, the highest so far in the history of this country.
We note that this government, within just two years, has already borrowed more than all the previous administrations under the democratic dispensation put together.
While we are further concerned about the use to which the borrowed funds are being put to, especially against the allegations in some quarters that funds are already being stockpiled for 2019 general election, we point to the devastating consequence of a relapse to negative growth as warned by the CBN.
Obviously, such adverse development would not only undermine the livelihood of the average Nigerian but also undermine the democratic progress the country has made in the last one and half decades.
We align with the CBN’s position that in the event of any further borrowing happening it should be targeted to growth in the private sector where accountability and discipline in application of funds can be better guaranteed.
We also support the CBN’s position that government should exercise fiscal restraint to check the growing deficit, while we welcome the proposal by government to issue sovereign-backed promissory notes of about N3.4 trillion for the settlement of accumulated local debt and contractors arrears.
This is expected to inject liquidity and rational allocation of funds into the economy, and would largely propel growth.