Kemi Adeosun, minister of finance, says Nigeria has no choice than to borrow, considering that oil prices are not returning to $110 per barrel anytime soon.
Speaking at the 14th Daily Trust Dialogue in Abuja, Adeosun said the 2017 budget has a deficit of N2.36 trillion, which would only be financed through borrowing.
She joined Atedo Peterside of Stanbic IBTC, Yakubu Dogara, speaker of the house of representatives, and some other professionals in discussing the theme ‘Beyond recession: Towards a resilient economy’.
“Where are we today and what’s the problem? This is my requirement every month: salaries, statutory transfers every month, I need N210 billion every month,” Adeosun said.
“Debt, not the debt that we are planning to take, but the inherited debt; I need N120 billion just to service it. So, every month, I need N330 billion
“Just to give you an idea of where we are today, last month’s FAAC allocation was N310 billion. So, the federal government got about N140 billion; but I must cover N330 billion a month before we can do a single capital project.
“So, when we start the argument, should we borrow, should we not? The truth is that we have no choice. If you are waiting for the oil price to recover, the prognosis is that it’s not going to go back to $110 per barrel any time soon.”
The minister added that: “To get the economy growing, we have no choice but to look for low-cost funds and put that infrastructure in place, because it is the infrastructure that will unlock the economy”.
Adeosun attributed the high rate of non-performing loans in the banking industry to the huge contract sums owed by government to its contractors that had collected loans to finance these contracts.
She added that the government is working with the CBN to issue promissory notes to clear these backlog of debts.
“So, we are working with the CBN to issue a promissory note to clear the backlog. When we clear the backlog then we start afresh,” she said.
“If you get a government contract, these are your payment terms, and that will also give us lower pricing.
“What we have discovered is that because people feel that there is a risk that they may not be paid, they load the price of the contract.”