LCCI issues debt sustainability warning as Tinubu government plans to borrow another $2.2 billion

• The Lagos Chamber of Commerce and Industry (LCCI) has issued a warning to the Nigerian government.
• The Chamber expressed concern over Nigeria’s growing debt profile, noting that it could jeopardize financial stability.
• LCCI noted that debt servicing costs could potentially exceed capital expenditures in the 2025 budget.

The Lagos Chamber of Commerce and Industry (LCCI) has expressed concern over the Federal Government’s decision to take another external loan of $2.2 billion.

The chamber warned that this could worsen Nigeria’s infrastructure problems and increase debt sustainability risks.

Chinyere Almona, LCCI CEO, warned in a statement that rising debt servicing costs could soon exceed capital expenditure allocations in the 2025 federal budget.

Legit.ng It was earlier reported that President Tinubu had sought permission to borrow $2.209 billion from external sources and the Senate and House of Representatives had approved it.

According to Tinubu, the $2.209 billion loan request will help finance the 2024 budget deficit.

LCCI concerned about Nigeria’s debt levels

Punch reports that Almona, in her statement, stressed the need for adequate risk protection measures.

She said:

“The concerns stem from weak economic performance and the lack of a clear strategy to address these challenges and achieve economic stability in the near future.

“With a debt-to-GDP ratio exceeding 50%, debt servicing costs are projected to exceed capital expenditures and Nigeria, owing about $17 billion, remains the third largest debtor to the Agency for International Development (IDA).

“LCCI feels obliged to reiterate its warning of imminent debt sustainability issues that could further undermine critical infrastructure across the country.

“The Chamber has consistently advised against relying solely on debt financing to address the fiscal deficit, emphasizing the need to explore alternative financing options.

“The main concern with continued borrowing is the possibility that debt service obligations will exceed infrastructure allocations, particularly in the 2025 federal budget.”

Almona expressed concern about the potential impact of external currency shocks caused by the depreciation of the naira against the dollar, which could complicate debt servicing.

She noted that the Central Bank of Nigeria (CBN) has been trying hard to increase the supply of foreign exchange to stabilize the naira, but without much success.

Given these challenges, she stressed the importance of the government being cautious in its borrowing practices, The Cable reported.

Almona also called on authorities to prioritize transparency and accountability in the use of borrowed funds to ensure they are used effectively.

China accounts for 81.98% of Nigeria’s external debt.

Legit.ng It was previously reported that the news of China’s takeover of Uganda airport has sparked strong reactions from Nigerians as many fear a similar fate awaits Nigeria.

While details of Nigeria’s agreement with China are not publicly available, DMO data shows Nigeria owes more than N1 trillion in debt to the five countries.

As expected, China accounts for the largest amount of debt among countries, and the debts were obtained through bilateral agreements.

Source: Legit.ng