…Says FG’s Appetite For Borrowing Putting Nigeria’s Economy At Risk
The Lagos Chamber of Commerce and Industry (LCCI) has raised concerns over the Federal Government’s plan to secure a $2.2bn external loan, currently awaiting approval from the National Assembly.
The business community is increasingly alarmed by Nigeria’s precarious economic situation and the potential ramifications of additional borrowing on the nation’s financial health.
In its statement, the LCCI highlighted Nigeria’s already strained fiscal position, with a debt-to-GDP ratio exceeding 50 per cent and debt servicing costs threatening to eclipse capital expenditure in future budgets.
The country, now the third-largest debtor to the International Development Association (IDA) with an external debt of approximately $17bn, faces significant challenges in maintaining debt sustainability.
The International Development Association (IDA) is a part of the World Bank that provides grants and low-interest loans to help the world’s poorest countries.
The IDA’s goal is to reduce poverty by helping countries invest in their futures, improve lives, and create safer, more prosperous communities.
The Chamber in a statement signed by Director General of LCCI, Dr. Chinyere Almona warned that reliance on borrowing to fund budget deficits, without considering alternative financing strategies, poses a grave risk to infrastructure development and economic stability.
It noted that rising debt servicing obligations could outpace allocations for critical projects in the 2025 federal budget, exacerbating the nation’s infrastructure deficit.
The LCCI also expressed concerns about currency volatility, with the depreciating Naira increasing the burden of dollar-denominated debt servicing.
Efforts by the Central Bank of Nigeria to stabilize the foreign exchange market have yet to yield meaningful results, further complicating debt repayment strategies.
To address these challenges, the LCCI recommended several measures, which include that the government should ensure transparency and accountability in deploying the borrowed funds.
According to the Chamber, the funding of critical business-supporting infrastructure like electricity supply, security for food production and logistics, and enablers manufacturing should be of utmost importance.
It noted that beyond borrowing, the federal government should intensify efforts to expand the non-oil revenue base through tax reforms, improved compliance, and the promotion of export-driven sectors like agriculture and manufacturing.
Urgent steps according to the Chamber are required to stabilize the naira and address the structural issues in the foreign exchange market to reduce the negative impact of external borrowing.
It added that greater reliance on PPPs for infrastructure development can reduce the pressure on public borrowing while encouraging private sector participation and efficiency.
The Chamber called on the Federal Government and the National Assembly to critically evaluate the long-term implications of the proposed borrowing. It urged fiscal prudence, robust monitoring, and strict accountability to ensure that capital projects funded by these loans deliver tangible benefits.
“The government’s borrowing appetite needs to be keenly managed,” the LCCI emphasized, as it cautioned against jeopardizing Nigeria’s economic future by over-relying on debt financing.