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Reduce borrowing, tap private investments – World Bank tells FG



The World Bank has urged the Nigerian government to put more energy into attracting private sector investments into the economy and cut down on excessive borrowing.
The warning, again on the rising debt is coming as authorities insist that debt levels remain sustainable.
By end of 2018, Nigeria would have borrowed some N5.839.27 trillion just in three years to fund the budget deficits with Debt-to-GDP Ratio currently sitting at about 20 percent, even though it is lower than standard peer group threshold of 56 percent.
The caution also comes amid concerns that about 40 percent of low income countries in Sub-Saharan Africa region are already in debt distress or in high risk of debt crisis.
In an exclusive with BusinessDay, Hafez Ghanem, World Bank new Vice President for Africa acknowledged that Nigeria needed much resources to fund development needs, but strongly advised against the present excessive borrowing by government.
“We believe that in maximizing finance for development, we should do our best to finance these investments without incurring debt, and it is by getting the private people to finance investments,” Ghanem stated, responding to BusinessDay concerns on rising debt.
As contained in the appropriation bill signed by President Buhari in June, the federal government will borrow N1.643 trillion to partly finance the N1.950 trillion budget deficit in 2018.
Out of this sum, Government intends to borrow N793 billion from domestic sources and N849 billion from foreign sources.
Ghanem explained that while most governments around the world today are facing very tight budget constraints, at the same time, there are financial markets that are quite liquid that could be resorted to for private capital.
“So, let us attract private sector to finance those investments without governments having to borrow. So instead of me borrowing to build an airport, I can get an investor to build the airport and run it, so I get the service without running into debt.
“This is the one basic way that we are looking at funding development,” he explained.
The World Bank also projects that the Nigerian economy would grow by around 2 percent in 2018 and expand to about 5 percent in the next three years, however, a major headwind to the growth prospects is Nigeria’s over reliance on oil as well as the struggling power sector.
“The oil market continues to be a major risk for Nigeria and it is not only Nigeria, many countries in Africa are very dependent in commodity exports whether it is oil, cocoa, so that is really the challenge for the continent and for Nigeria obviously, the challenge is how can we remove ourselves from this dependence on commodities and how can come into the digital economy,” Ghanem said.
The World Bank chief is of the view that to encourage faster growth, government must invest in three things, including the infrastructure, human capital as well as a regulatory framework that encourages entrepreneurship and young people.
Ghanem who resumed last month as the new World Bank Vice President visited Nigeria which he calls a very strategic country in Africa, to discuss with government officials and other stakeholders on how the bank might be of additional help to boosting economic growth not just in the country but on the continent.
“I started my new position as the vice president for the Africa region of the World Bank about a month ago and of course I wanted to come as earliest as possible to Nigeria because Nigeria is a big and important country in Africa. At the World Bank, our mission is to fight poverty, to support economic growth and development and that is what we are trying to achieve in Africa,” he told BusinessDay.
“And obviously given the size and importance of Nigeria, if you want to fight poverty in Africa, drive economic growth in the continent, we need growth and development in Nigeria. And so I wanted to come here to listen to our Nigerian counterparts about their views, about how the World Bank can serve them best, how the bank can contribute to growth and development and poverty reduction.”
Speaking further to BusinessDay, the World Bank Vice President also harped on the need for the government to intensify domestic resource mobilization rather than increase debt.
“The other aspect that when we look at with regards to the whole financial sustainability and the capacity of countries is domestic resource mobilisation, how can you mobilize more resources domestically through your tax system rather than increasing debt.

“So those are the two areas that we have been working with the countries in the region, attracting investments so that governments do not have to spend and also helping governments put in place systems so that they can raise more resources domestically.