By Yinka Kolawole
The Lagos Chamber of Commerce and Industry (LCCI) has expressed deep concerns that the nation’s mounting debt profile has become unsustainable, noting that forthcoming domestic issuances could push up public debt stock to N34 trillion by the end of 2020.
Statistics from Debt Management Office put public debt at N31 trillion at the end of the second quarter, 2020, equivalent to 21 percent of GDP, and LCCI said that adding the credit support being expected from multilateral financial institutions would bring the year end figure to N34 trillion.
Briefing the media yesterday in Lagos, President, LCCI, Mrs Toki Mabogunje, stated: “LCCI is deeply concerned about the country’s rising debt portfolio without corresponding impact on output growth and economic development.
“According to official statistics from the Debt Management Office, public debt stock grew by eight percent to N31 trillion at the end of the second quarter, equivalent to 21 percent of GDP.
“At the peak of the pandemic in the second quarter, the Federal Government received financial support worth $3.4 billion and $288.5 million from the International Monetary Fund (IMF) and African Development Bank (AfDB) respectively, while negotiations are also on-going for a cumulative $1.8 billion credit support from the World Bank, African Development Bank (second tranche) and Islamic Development Bank.
“Adding this to prospective domestic issuances could possibly push the country’s public debt stock to around N34 trillion by year-end, equivalent to 23 percent of GDP.
“The growing level of the country’s debt is fast becoming unsustainable in the light of dwindling oil prices and production.
“Our position is reinforced by the uptrend in debt-service to revenue ratio from 60 percent by year-end 2019 to 72 percent as of May 2020. The high level of debt servicing continues to hinder robust investments in hard and soft infrastructures which are key to stimulating productivity and improving living standards.”
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She further stated that the Chamber expects inflation to sustain its upward trajectory for the rest of the year.
“The major drivers of inflation are structural factors, which are beyond the purview and control of monetary authorities. The combination of food supply shocks, foreign exchange restrictions on food and fertilizer imports, higher energy costs – electricity and petrol, exchange rate adjustment, poor infrastructure, and insecurity in major food-producing states would pressurize domestic price level in the near term,” she said.
The LCCI president urged policymakers to formulate and implement policies that facilitate business continuity, particularly at this time that business operators are grappling with the devastating impact of the COVID-19 pandemic.