LCCI Sees Outstanding Debt at N40tr, Warns of Loan Abuse Under Amended FRA | The Guardian Nigeria News
The Lagos Chamber of Commerce and Industry (LCCI) has forecast Nigeria’s outstanding debt to reach N40 trillion by the end of fiscal 2021, citing concerns over the debt service ratio. high debt / income this year.
According to the House, the low-yielding environment should keep domestic borrowing high in the short term as it favors the federal government in raising funds at lower rates, as does the reality of the new taxes, tariffs and levies being imposed on consumers of this year is becoming evident.
With the new changes to the budget law approved for 2021, the chamber warned that amending the Fiscal Responsibility Law to allow the government to borrow for “critical reforms of significant national impact” (which are not not defined) could lead to an abuse of the definition of what is a “significant national impact”.
The LCCI explained that its concerns are based on the government’s growing stock of debt and wondered what levels might become when more room is created for more borrowing.
LCCI President Asiwaju Olawale-Cole, at his quarterly state of the economy press conference, forecast a total debt stock of between 39,000 and 40,000 billion naira by the end. of the year 2021.
He added that with projected borrowing of 4.893 trillion naira, 4.750 trillion naira and 5.356 billion naira in 2022, 2023 and 2024 respectively, debt sustainability issues will remain high.
In addition, the chamber expects headline inflation to remain high, as the combination of food supply shocks, exchange rate policies, higher energy costs, currency illiquidity, insecurity increase in major food-producing states would continue to put pressure on domestic consumer prices.
“We believe that a generalized harmonization of budgetary and monetary policies aimed at remedying the structural constraints identified will contribute significantly to moderate inflationary pressures in the medium term,” he advised.
He warned that inflation at 15.4% in November 2021 remains high and portends serious implications for various economic agents, including households, businesses and investors.
He said an inflationary environment erodes consumers’ real disposable income, weakens purchasing power, pushes up production costs, worsens the cost of living, weakens corporate profitability and undermines investor confidence.
“The collaborative effort of budgetary and monetary decision-makers is necessary to face the structural constraints that fuel inflationary pressure.
Dealing with the security crisis across the country is not only highly imperative but also very urgent, ”he noted.
The LCCI boss further stated that economic activities are expected to increase until the pre-Covid-19 period in 2022, stressing that due to this trend, the Chamber expects growth of between 2.5 % and 4%.
He highlighted key economic activities to watch in 2022, including election campaigns, supply chain disruptions, removal of fuel subsidies and pressure on the Naira.
“As we see inflation moderating in 2022, we expect the CBN to remain focused on price stability due to the known effects of high double-digit inflation on the economy. However, external pressures could lead to rate hikes. Fiscal resources could benefit from a boost in 2022 thanks to a recovery in oil revenues and expected profits from the NNPC as the PIA is implemented, ”he said.
He recommended that to maintain the pace of recovery recorded in 2021, fiscal and monetary policymakers must be well coordinated in promoting growth-enhancing and confidence-building policies that would encourage private and foreign capital inflows into the economy.
He said the enactment of the 2022 FGN Appropriation Bill is laudable as it paves the way for swift implementation from January 1, 2022.