Fed Govt borrowing to save jobs, says minister

More credit lines coming for banks
Nigerians in Diaspora to borrow from home
The Federal Government’s desire to borrow more
funds from international creditors is to prevent job
losses, Finance Minister Kemi Adeosun has said.
Mrs. Adeosun, who spoke yesterday at a joint press
conference with the Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, at the conclusion of
2017 International Monetary Fund (IMF)/World Bank
Group Annual Meetings in Washington D.C, said with Nigeria’s source of revenue dropping by nearly 85
per cent, the country had no option but to borrow.
The option before the country was to either cut
public services massively, which should have led to massive job losses, or borrow in the short-term,
until it begins to generate sufficient revenues, she

“We felt that laying-off thousands of persons was
not the best way to stimulate growth. Also, when we came into office, about 27 states could not pay
salary. If we had allowed that situation to persist,
we would have been in depression by now. So, we
took the view as a government that the best thing
to do was to stimulate growth and spend our way
out of trouble, get the state governments to pay
salaries, making sure that the federal government
pays and invests in capital infrastructure,” Mrs
Adeosun said.

Emefiele said the apex bank was trying to
encourage Nigerians in Diaspora to keep remitting
funds home, and also invest in the country, as they
do not have any other place they can call home but Nigeria. Nigerians in Diaspora remit $21 billion
annually to the local economy.
“We will put in place policies that will continue to
encourage them. We are working on how we can
actually link credit bureau arrangement to the
foreign borrowing arrangement so that once there is a link between Nigeria and the foreign credit
system, it will be easy for them to even borrow
from Nigeria,” he promised.

The CBN boss said the apex bank was also planning
to ensure that Nigerians in Diaspora get some form
of attachments to the credit system that they have
abroad, either in the United States or United
Kingdom. That, he said, will make it easy for them
to access credit and begin to build their businesses,
so that when they retire, they retire back into
Nigeria, and they do not retire in Diaspora.
Mrs Adeosun said that once growth was restored,
the country would begin to systematically reduce its
dependence on borrowing. “Now, we are talking
about tax and what we are saying is that people
should be aware of their responsibilities to their
nation. The solution to borrowing in Nigeria is that
we must pay taxes. If you pay the taxes properly,
there is no need to borrow. Of course, there is the
responsibility on the part of government to be more
responsible and efficient. We are really focusing on
this. We are trying to find ways to cut cost.
Fundamentally, we must invest. We don’t have the
power we need, we don’t have the roads yet and
there is a lot of money required to fund these
projects,” the minister said.
Continuing, she said that reducing Nigeria’s tax to
Gross Domestic Product (GDP) ration from six per
cent to 10 per cent would significantly reduce the
amount the country needs to borrow and that would
have a wider effect on the economy and bring down
interest rate.

She added that such a move would also create
some head room for the private sector to borrow,because they are being crowded out.
On state borrowing, the minister said state
governments’ get borrowing consent from the
ministry, which performs Debt Sustainability
Analysis and if the repayment is more than 40 per
cent of their revenue, such request to borrow is
turned down.
“So, many people are talking of how many loans we
are approving; they don’t talk about how many
loans we are turning down. Many do not go through
and we are constantly monitoring state
governments to ensure that the debts that they take
on are sustainable. The problem with some of the
states that have debt problems are legacy loans
that were there before they came in. But since we
came in, we have been very strict, trying to make
sure states do not borrow more than they can
service,” Mrs Adeosun said.
According to the minister, Nigeria’s debt to GDP
ratio is one of the lowest. “We are at 19 per cent,
but most advanced countries have over 100 per
cent. I am not saying we need to move to 100 per
cent, but I am saying we need to tolerate a little
more debt in the short-term to deliver the rail, the
roads and power so as to generate economic
activities, jobs, revenue, which would be used to
pay back the debts. But I assure you that this
government is very prudent around debt. We don’t
borrow recklessly and we have no intention of
bequeathing unserviceable debts on Nigerians,” she

The minister said the Voluntary Asset and Income
Declaration Scheme (VAIDS) had so far got positive
response from Nigerians. “I had discussions with
some high net-worth individuals asking me to speak
to the state governors to allow them time to pay.
They needed to pay to the state governments. I
have discussed with the governors that anyone that
comes to them voluntarily for tax payment, should
be given time to pay. We don’t want a situation
where people willing to pay their taxes are stifling
economic activities. We have told the governors, if
someone comes willingly, quickly allow them plan to
pay,” she said.
Mrs Adeosun said revenues were needed to provide
public services and the burden of taxation must be
borne by those whose income allows them to bear
“So, those with higher income should bear greater
part of the burden. The problem with Nigeria is that
most of our taxpayers are at the lower level. The
man on the streets passing traffic, his tax is
deducted at source. Why will we not allow
billionaires to proportionately pay their taxes? I
think we need a mindset change on taxation in
Nigeria. So far, we are encouraged by the response
of those companies and individuals to this tax
amnesty,” she added.
In her view, the tax amnesty policy is on track.
“We’re on track. We expect that at the end of the
timeline, everybody will rush and we will raise
significant money. We have every reason to believe
that this tax mobilisation effort will work and
hopefully bring long-term money,” she said.
“We are trying to do is create enough headroom to
invest in capital projects that the country
desperately needs. I do not think there is any
Nigerian that will say we do not need to invest in
power, do the roads, and that will not want us to fix
17 million housing deficits and build rails. These
projects will generate economic activities and jobs.
We do not need to continue hobbling as a poor
nation. We are middle income country now. Nigeria,
Angola, and South Africa are middle income
countries. We do it jointly and efficiently, but the key
thing really is revenue,” the minister said. 

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