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While it is true that Nigerians
should be concerned about mounting public debts, they should take solace in the
fact that such debts are being used to catalyse economic growth and development,
which will, in turn, lead to increased production that would eventually be used
to offset the loans.

Director-General of Debt Management
Office (DMO), Abraham Nwankwo, said in Abuja, at the weekend, that during a
period of recession, there was the need for government to borrow to finance
infrastructure and that foreign loans were much cheaper than borrowing from
domestic sources.

“The two things to say is, first,
there is no doubt that Nigerians are right in asking questions and getting
concerned about value for money and about how we get proceeds from what we use.

“The concerns are valid, correct
and appropriate, nobody should doubt that and the important thing to say is
that in every system where there is a failure, there are people responsible for
tracking why there is failure and for doing the monitoring for effective and
appropriate sanctions if there are needs for sanctions.”

According to him, Nigerians should
look back at the needed infrastructure that has been financed by recent loans
obtained both locally and internationally.

“Over the past four or five years,
the Abuja Airport road was expanded from four 
to 10 lanes and same with Abuja-Kubwa-Kaduna road. These two projects
were actually funded with money borrowed domestically.

You are aware that the Nigerian
rail lines are being resuscitated with new locomotives purchased, and Lagos,
Ibadan, Kano rail lines have been fully resuscitated. These were done with
external borrowing. These are some of the examples,  on routine basis and on a permanent basis.

“You are aware of the various
agricultural projects, some are mainly funded by the World Bank and some of
them in some areas are called FADAMA and some of them still exist in all parts
of the country. All those projects are funded with borrowed money.

“You are aware of the polio
eradication programmes, those are funded with borrowed money from IDA in
particular, that is the concessional window of the World Bank. You are aware of
the various rural water supplies; these are funded with money borrowed from the
multilateral sources. These are some of the major popular projects funded from
borrowings,” Nwankwo said while citing examples.

He also gave the assurance that
generally, however, all the monies borrowed from external sources were projects
tied and explained that the World Bank, for instance, did not give loans without
supervising it themselves.

“They must supervise it themselves
and they must have people working with the Nigerian team to monitor the project
from the beginning to the end. They don’t just disburse the money and walk
away, they disburse the money as the work progresses. So, even when Nigeria
seeks for a loan and it is approved, the disbursement of the loan is done
according to the schedule of the work itself,” he explained.

He described the current N16
trillion debt profile of Nigerian governments as still within manageable
limits, saying it was just 12.24 per cent of the gross domestic product.

“We are very comfortable, but we
also accept that we have a challenge with our domestic debt service because of
the high cost of fund domestically.

“This is one of the reasons why
there is need for us to see that if we must borrow, as we must borrow, it is
necessary for us to see how much we can conveniently borrow from external
source since that will help reduce the domestic cost of funds, because when the
demand from the domestic market by government drops, it means whatever
resources are available, it is there for the private sector.

“And because the demand pressure is
lower, the cost will be lower too. That’s one of the strategy of government and
that’s one of the reasons why borrowing from the external source is encouraged.”

Responding to suggestions that
government should rather support the private sector to borrow funds to develop
infrastructure, the DMO boss agreed, but insisted that government would not
leave infrastructure development entirely in the hands of the private sector.

“Our position is that government
should develop infrastructure and government is exploring all options in doing
that. In order to fund infrastructure, government is encouraging the private
sector through Public Private Partnerships (PPP), through concessioning,
through Build, Operate and Transfer, through guarantees but that doesn’t mean
there is any country where the entire infrastructure will be funded by the
private sector.

“There must be some component of
infrastructure that must be funded by the government because the private sector
does not find it attractive at that point in time. Government is not excluding
the private sector from participating in infrastructure funding. Rather, it is
encouraging them, but government also appreciates that there must be part of
the infrastructure, which it must fund at least at this point in time.”

He then gave assurance that once
the loans are deployed properly, it would not be difficult to repay.

“You are borrowing to turn around
the economy, to have efficient rail and road transportation, efficient and
reliable power supply, that’s why we’re borrowing. We are not borrowing for
borrowing sake. You want to transform the economy by covering the infrastructure
deficit and if you do that, the cost of production in the economy will fall, so
beyond inflation and all those issues like infrastructure deficiency, we will
deal with them.

“Moreover, if you have sufficient
infrastructure, it helps to diversify both export and domestic supplies. We
import most of our goods, some of which we produce locally but the imported
ones are cheaper but if the cost of production falls because of reliable and
efficient infrastructure, the cost of production falls, so the final products
from Nigerian factories will be low, Nigerians can now buy the cheaper ones and
that boosts the economy.

“On the other hand, the fact that
you are producing competitively at cheap cost here means you can even export
beyond West Africa, because you can now compete just as China is producing at
cheap prices and bringing them here, we can also produce at cheap prices and
sell to other countries.

“When you start exporting to other
countries, of course you will start earning more foreign exchange. If you’re
exporting five or seven export products and, in addition, you are exporting
maybe three, four or five solid minerals, which belong essentially to
government.

“With that type of diversification,
all of the private sector export of solid minerals, in addition to oil and gas,
if we build infrastructure in the next five to seven years before those loans
mature in 15 to 30 years, we should be in a position to service our debt and
you would have turned around the economy.”

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