Finance Minister makes U-turn, says Nigeria will continue to borrow

The minister of finance, Mrs Kemi Adeosun, has made a U-turn over her earlier statement that that Nigeria would not borrow to fund its budget.

But the minister has now declared that the country would continue to burrow on the grounds that there is the need to attract more funds to cover the fiscal deficit in the 2017 Budget.

Adeosun had on Tuesday said Nigeria can no longer afford to continue borrowing to fund its budget and must seek alternative fundraising mechanisms.

The minister, however, in a statement by the Director of Information of the ministry, Mr Salisu Na’Inna Dambatta on Thursday said “Following recent reports on comments by the Minister of Finance about Nigeria’s debt strategy and ability to borrow, it is important to clarify the position of the Minister and the Federal Government.”

She said that Nigeria would continue to borrow to fund its infrastructure deficit and cover its fiscal deficit of N2.356trillion in the 2017 budget.

Adeosun said that Nigeria has “headroom to borrow” and was doing so aggressively in the short to medium term in order to address its infrastructure deficit and to stimulate growth.

According to the minister, “Nigeria will continue to borrow. Nothing has changed.”

She observed that the country’s debt to GDP ratio is low “when compared to our contemporaries in Africa, and across most of the developed world.”

“We have headroom to borrow and are doing so aggressively in the short to medium term in order to address our infrastructure deficit and to stimulate growth.”

Adeosun said that the Economic Recovery and Growth Plan (ERGP) provides for an increase in spending over a three-year period, which is reflected in the 2017 budget.

She said “In 2017, the government is committed to spending N7.44 trillion, with a projected fiscal deficit of N2.356 trillion, which will be funded by a combination of domestic and international borrowing.”

However, Adeosun said that Nigeria cannot rely on debt indefinitely.

She said that the country must be focused on a future where it can earn enough internal revenue to spend on the projects that will grow the economy.

“In the short term, though, increased spending, funded by debt, will act as the stimulus we need to grow.”

“At the same time, it is vital that Nigeria diversifies its revenue base and builds its revenue profile, as is projected in the ERGP, to ensure that we do not continue to overly rely on debt to fund our budget spending over the long term. ”

“To build a sustainable economy we must replace the debt that we are incurring in the short to medium term, with strong revenue sources.”

“That is why the Ministry of Finance is focused on expanding our tax base, which we are doing with a range of initiatives which include the Voluntary Asset and Income Declaration Scheme (VAIDS) and recruitment of Community Tax Liaison Officers (CTLOS) to improve tax compliance in the long-term, and we are heavily focused on making government spending more productive and efficient.”