Financial Economists and President, Association of capital market Academics of Nigeria, Professor Uche Uwaleke, has warned the federal government to stop making commercial loans, especially Euro bonds.

He also cautioned that if the government must continue to borrow, especially foreign loans, it must not only borrow responsibly but the source for long term credits and comply with the Fiscal Responsibility Act of 2007

The Financial economists who spoke exclusively with TN, on the side-lines of recent backing of the Federal government’s borrowing initiative by the Senate President, Dr. Ahmed Lawan, noted that the critical time the country is faced economically, was the time to put a stop to accepting commercial loans especially Eurobonds because they are relatively expensive to service.

He alluded to a recent revelation by the Debt Management Office, DMO, that the Federal Government spent a whopping sum of over N1trillion in debt service alone in Q1 of this year, with over N300billion of the sum in servicing Eurobonds.

‘’According to the DMO, the country spent a whopping sum of over N1 trillion in debt service alone in the first quarter of 2021 out of which over N300 billion went to service Eurobonds’’ Professor Uwaleke clarified, warning that ‘’this is the time to put a stop to the uptake of commercial loans especially Eurobonds which are relatively expensive to service’’.

Though he agreed with the Senate President that government should continue to borrow to fund infrastructure, especially in view of the huge infrastructural deficit in the country which cannot be significantly financed from annual budgetary allocations, the guiding word, according to him, must be, ‘borrowing responsibly’ and applying the proceeds very well.

He said ‘’In view of the huge infrastructural deficit in the country which cannot be significantly financed from annual budgetary allocations, I agree with the Senate President that the government should continue to borrow responsibly to fund infrastructure.

‘’But the keyword is responsible because borrowing is not in itself a bad idea provided the proceeds are well applied’’.

He argued that for a country like Nigeria with development sustainability questions, evidenced by the huge debt service ratio, responsible borrowing suggests that managers of the nation’s economy sourced long-term loans which are concessional and restricted to self-liquidating projects.

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Therefore, going forward, any further loans, especially external, must comply with the Fiscal Responsibility Act of 2007, he charged.

Explaining further, the expert stated that there was no gainsaying the fact that Nigeria’s debt burden is aggravated by low revenue generation efforts, which describes the choking debt service to revenue ratio, but the government should look into this critically, including empowering the State governments to control and develop resources in their States in order to boost exports and diversify the economy away from crude oil.

Professor Uwaleke challenged Dr. Lawan to champion the course in the true spirit of fiscal federalism.

‘’I expect the Senate President to champion this as it will be in the true spirit of fiscal federalism.

‘’I believe if the present 1999 Constitution is amended to reflect Resource control, the nation’s potentials will be triggered to a point where Nigeria is no longer seen as a poor country despite huge material and human resources endowments’’, he maintained.

On the need to stop additional taxes to boost revenue generation, Professor Uwaleke agreed with the Senate president, as according to him, ‘’taxes should not be increased at a time of weak aggregate demand and tepid economic growth’’.

He explained that a rise in personal and corporate taxes will reduce disposable and investible income on the part of individuals and firms respectively and further weaken aggregate demand but advised that the government’s tax net can be widened, and efforts intensified at curbing the high incidence of tax evasion through the development of technology, even though the Nigerian economy managed to record a growth rate of 0.55% in Q1 of 2021 according to the National Bureau of Statistics, NBS.