THE POLITICS OF DEBT

THE POLITICS OF DEBT
                                 By: 
                     Nurudeen Dauda
                    June 3, 2020
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The Senate of Federal Republic of Nigeria has on the 2nd of June , 2020 approved the $5.51 billion loans request of the federal government. The said approved loans must be subject to the concurrence of the federal House of Representatives.
               
However, economically speaking, Debt or loan in itself is not necessarily “bad”, but what you use it for makes it is“good”or "bad". At governmental level, to borrow for the sustainance of ostentatious life style or the financing of its over bloated Bureaucracy is "bad", but for infrastructural development is a sound economics. At individual level, to borrow and “get married” or“remarry” is“reckless", but to build a “house”or starts up a viable business is a sound economics.

The United States of America is the most indebted country in the world yet the number one economy in the world. Lagos state is the most indebted state in Nigeria yet the most developed state economy. Dangote group is the most indebted group in Africa yet the richest. Brazil is the most indebted country in Latin America yet the number one economy in the zone. Japan is the most indebted country in Asia yet the second biggest economy in Asia and the third in the world. South Africa is the most indebted country in Africa yet the second biggest economy in Africa. Germany is the 4th most indebted country in the world yet the biggest economy in Europe.

We have an infrastructural deficits of over 30 trillions naira in the country.  In my thought, we need a judicious usage of loans, but strictly on "infrastructures"; such as: roads, rails, electricity, housing, airports , seaports, hospitals, bridges, schools, agric mechanization, and dams for irrigation and water supply etc., which is capable of attracting both local and foreign investors in order to set up businesses or companies that will create jobs and generate taxes to the government for repayments .

To borrow for the financing of capital projects is a sound economics , but for recurrent expenditures is a bad economics. I support loans for capital projects, but not for recurrent expenditures. Capital projects are the gateways to industrialazation, jobs creation , economic growth and development. 

In my observation, for us to rapidly develop, there must be tremendous reduction of our cost of governance. The ratio of our recurrent expenditures which is at about 70% or more to capital expenditures which is at about 30% or less is to too much . If we must rapidly develop, our capital budget should be least at about 60% or more while the recurrent budget should be at about 40% or less of our annual budget.

Ideally, all government borrowings are supposed to be for “capital expenditures” not consumption. Our debt should and or must be strictly on capital spending. 

May God bless Nigeria!

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