I’m not a financial analyst and I won’t pretend to be one. Just a Nigerian concerned about the turn of events. The reality of the recession hits home and the Federal Government recently approved plans to borrow funds from the World Bank and a few others.
Then a few days after this, former CBN governor and Emir of Kano, Sanusi Lamido writes on the foolery in borrowing funds to pay off debts, saying it’s unsustainable. He says government should invest borrowed funds in growing the economy as against spending it on consumption.
Which seems logical. Incurring debts to pay off other debts creates a cycle where everything looks good on the surface- but the debt remains one way or the other. And interests keep mounting also.
The Emir didn’t address the government directly. Who can it be?
Pegging it on the FG is not farfetched. In June the Minister of finance, Kemi Adeosun, said the government was borrowing funds to be able to pay the N165 billion a month needed to cover civil service salaries.
Will it then be safe to assume that Sanusi’s stance came from some credible information he got?
We know the council of state approved the plans put forward by the Federal government. And the loan will be for agriculture, power, mining development, and health sectors.
The Minister for Finance, Mrs. Kemi Adeosun on her part says the government plans to spend the loan on develop strategic structures capable of reviving the economy. (keyword -develop).
While we haven’t seen the fine-print, there’s no mention of recurrent expenditure or something of that nature that could raise a red flag.
Mr. Bismarck Rewane, an economist and the Managing Director of Financial Derivatives Company Limited, supports the idea of borrowing to get the nation back on its feet.
In an interview on Channel Television, he says “the government must inject funds into the system”.
In Sanusi’s statement he makes mention of a minster and the need for a policy change.
“If a policy is wrong, it is wrong. Nothing will make it right. And it has to be changed. So that is what we did.”
So it’s safe to say the government will inject said loan in developing key sectors (mentioned earlier) to grow the economy.
While the Vice President says the economy will be back on its feet in a couple of years– this strategy might just be what he’s banking on.