LCCI concerned over FG’s $2.2Bn borrowing plans to fund budget

The Lagos Chamber of Commerce and Industry (LCCI) has expressed concerns over the Federal Government’s plan borrowing plans of $2.2 billion, warning of potential debt sustainability issues and impacts on infrastructure.

The chamber, in a statement on Friday in Lagos, said that there was need for diversifying funding sources beyond debt financing.

Its Director-General, Dr Chinyere Almona, said that the Federal Government could intensify efforts to expand the non-oil revenue base through tax reforms and promote export-driven sectors like agriculture and manufacturing.

Almona also suggested other options such as boosting exports, tourism, agriculture, and solid mineral resources.

She also advocated for privatising certain State-Owned Enterprises (SOEs) and improving the efficiency of those remaining under government control.

According to her, this development has caused some stirs in the business community.

Almona noted that the concerns were driven by the weak economic fundamentals and the lack of understanding of how to navigate through these challenges to a better economy in the near term.

She added that the country had an estimated debt-to-Gross Domestic Product (GDP) ratio of above 50 per cent, debt servicing expenses set to swallow our capital expenditure, and already owed about 17 billion dollars.

“The LCCI is taking the responsibility to, once again, warn about imminent debt sustainability issues and how that may further weaken the state of critical infrastructure in the country.

“The Chamber has always advised against solely using debt financing without considering other options to fund budget deficits.

“A critical perspective of further borrowing is the risk to losing steam on infrastructure financing as debt servicing alone may rise above what is set aside for capital expenditure in the 2025 federal budget.

“Another concern is the exposure to the external currency shocks that may result from the depreciation of the Naira against the dollar in the course of servicing these accumulated debts,” she said.

Almona noted that the Central Bank of Nigeria had continued to struggle with boosting supply in the foreign exchange market to strengthen the naira but to no avail yet.

She said that with all of these concerns, government’s borrowing plans and borrowing appetite needed to be keenly managed.

The LCCI DG recommended that government should ensure transparency and accountability in deploying the borrowed funds.

She said that funding of critical business-supporting infrastructure like electricity supply, security for food production and logistics and enablers manufacturing should be of utmost importance.

She added that urgent steps were required to stabilise the Naira and address structural issues in the foreign exchange market to reduce the negative impact of external borrowing.

“Greater reliance on Public Private Partnerships (PPPs) for infrastructure development can reduce the pressure on public borrowing while encouraging private sector participation and efficiency.

“The LCCI urges the Federal Government and the National Assembly to carefully evaluate the long-term implications of our current debt status.

“Government must thread cautiously on the path of fiscal prudence, project accountability, monitoring and evaluating capital projects to ensure the delivery of funded projects,” she said.