40% Debt Ceiling Inadequate For Nigeria’s Infrastructural Deficit

31 Oct

NTURES AFRICA – Nigeria’s current debt ceiling of 40 percent is insufficient for an economic transformation push, given the present infrastructural deficit, business analysts suggest.

The Fiscal Responsibility Act of 2007 placed the country’s public debt limit at 40 percent, though it was lifted this year to 56 percent by the International Monetary Fund (IMF).

A $360 billion infrastructural shortfall, owing to decay and neglect, has sparked debates concerning the rationality of leaving the threshold at 40 percent.

Business experts and financial analysts, advocating for greater public borrowing, have emphasized that there is a clear-cut difference between a run up of bad debt and a constructive build up of good debt.

According to a bi-monthly economic and business report by Financial Derivates Company Limited (FDC): “For a country like Nigeria that has an infrastructure deficit of $360 billion, according to the African Development Bank (AfDB), a 40 percent debt cap is insufficient in getting the job done.”

The report revealed that an overhaul of the infrastructure gap would cost approximately $350 billion for an economy with an estimated GDP of $282 billion and an annual GDP growth rate of approximately 6.8 per cent.

It further argued that the Nigeria’s debt to GDP ratio of 35 percent is an unsuitable measurement tool for how much debt can be incurred, noting that such standards suited more advanced economies than developing markets.

Retrieved from: http://www.ventures-africa.com/2013/10/40-debt-ceiling-inadequate-nigerias-infrastructural-deficit/

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