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Nigerian News » Politics
 
 

 

Foreign borrowing’ll increase debt service burden — NBCC


 
Posted 9 months ago
 
 
 
 
Increased foreign borrowing will put more pressure on Nigeria’s debt service burden, the Nigerian-British Chamber of Commerce has said.

According to the chamber, the country’s debt service burden currently stands at 35 per cent owing to low government revenue and that additional external loans will certainly raise the figure.

In its latest economic review and policy statement, a copy of which was obtained by our correspondent on Wednesday, the NBCC said, “Foreign borrowing forms a significant portion of the Federal Government’s plan to plug the N2.3tn deficit in the proposed 2017 fiscal budget.

“Foreign borrowing will also place more pressure on Nigeria’s debt service burden, which is already about 35 per cent due to low government revenue.”

Advising the Federal Government on the development, the chamber noted, “The influx of foreign exchange capital will be essential in bolstering Nigeria’s foreign reserves. This will in turn increase foreign investor sentiment on FX liquidity.

It added, “With increased borrowing, further disruptions in oil production and failure to meet revenue targets may result in credit rating downgrades.

“This inflow of foreign capital coupled with robust fiscal policy will provide a much-needed injection of capital to fund key capital projects which will drive economic recovery and growth.”

The proposed 2017 fiscal budget shows that the Federal Government is planning to undertake foreign borrowing of N1.1tn ($3.6bn).

The NBCC, in the paper, said increased foreign borrowing would provide the much-needed influx of foreign capital.

It, however, noted that Nigeria’s current weak macroeconomic fundamentals suggested that investors would demand higher coupons on Nigerian sovereign debt.

The document read in part, “The Federal Government recently released its Economic Recovery and Growth Plan which addresses major structural deficiencies. However, the success of the plan lies on the ability of the Federal Government to implement and execute these policies.”
 
 
 
 
 

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