Borrowing to Fund Budget Deficits No Longer Sustainable—Edun

By Modupe Gbadeyanka

Nigeria’s Minister of Finance and Coordinating Minister for the Economy, Mr Wale Edun, has said the administration of President Bola Tinubu is looking at spending more money on revenue-generating infrastructure across the country to revamp the economy.

Addressing the joint Senate Committee on Finance, Appropriations, National Planning, Local and Foreign Debt on Thursday, he said attention would shift away from borrowing from local and foreign sources for financing budget deficits.

According to him, borrowing is no longer cheap and attractive because of high interest rates, which is increasing the country’s debt servicing figures.

Speaking at the gathering to examine the 2024-2026 Medium Term Expenditure Framework (MTEF) and Fiscal Strategy Paper (FSP), Mr Edun said the current usage of 98 per cent of the revenues generated by the nation to service debts was not encouraging, stressing that it would be suicidal to borrow more at this point.

“Clearly, the environment we have now; internationally as well as nationally, we are in no position to rely on borrowing.

“We have an existing borrowing profile. Our direction of tariff is to reduce the quantum of borrowing or intercepting deficit financing in the 2024 budget.

“Simply put, internationally, there is a focus among rich countries on bringing down the inflation rate to stabilize the economies and give them opportunity for investment growth.

“They are in the process of sacrificing that immediate goal for contracting their economies, or at least contracting the money supplies and pushing up the interest rates and of course, high interest rates and investments don’t go together.

“What are left for us to access are those funds that are expensive; so, it is the last thing that we must rely on.

“As we know we have all the figures and debt servicing and cushioning 98 per cent of government revenue.

“The last thing you can think of is to pile on more debts. The government needs to not just maintain its activity, it needs to spend more.

“If you look at government spending, if you look at the budget as a percentage of GDP, ours is one of the lowest which is 10 per cent; even Ghana is at 25 per cent and the rich ones at 50 per cent.

“The very rich countries and the most advanced in terms of social safety nets have a social security system at 70 per cent of Gross Domestic Product. Government spending definitely will lead to an increase,” the Minister said.