The Lagos Chamber of Commerce and Industry (LCCI) has urged the Federal Government to adopt equity financing to fund the 2023 budget deficit of more than N10 trillion.
This, it said in Lagos on Sunday would address the burden of interest payments that accompanies debt financing.
Dr Chinyere Almona, Director-General, LCCI, gave the advice while reacting to the 2023 budget of N20.5 trillion presented by President Muhammadu Buhari on Friday.
The budget, as presented by President Buhari as a deficit of N10 trillion.
According to Almona, Nigeria’s approach should not be to continue to expand its debt portfolio, especially with the increasingly unbearable burden of interest payments.
Apart from the debts, interest payments alone exposed Nigeria to fiscal vulnerably, she argued.
She stated that massive equity financing is the choice open to government to adopt to fund budget deficits.
Government plans to take N8.8 trillion in new commercial loans and use N1.77 trillion drawdown on bilateral and multilateral loans to finance the deficit.
“We are of the view that while nothing is wrong with the N10.78 trillion deficits, everything is wrong with the plan to take new loans of N10.57 trillion to finance it.
“The current administration should be encouraged to take advantage of the equity choice to bequeath a legacy that the incoming administration can build upon as Nigeria finds its way back to the path of fiscal sustainability.
“If government embraces equity financing, Nigeria will not have to make huge interest payments, and she can use some of the proceeds of the equity issuance to pay some debt.
“It can also use the proceeds from equity to make the fiscal situation more sustainable and rekindle much-needed confidence in the country’s economic and fiscal resilience.
“It is not too late to use equity to fund the 2023 deficit proposal,’’ she stressed.
Almona noted also that the N20.5 trillion size of the 2023 budget reflected the huge needs that existed in the critical sectors of the economy.
She commended the early transmission and signing of federal budgets in recent times and advised that to improve performance in the 2023 budget, the performance of the 2022 budget must be studied.
Government must look at what worked well, what failed, and what must be corrected in the implementation of the 2023 budget, she said.
Almona stressed that governments at all levels must put actionable policies in place to address the high costs of fuels and food to curtail the high rate of inflation which had distorted budget assumptions.
She added that particular attention must be paid to investing more on transport infrastructure to resolve many logistical challenges that had impacted negatively on the movement of goods.
“Looking beyond oil revenues, we can enhance our FOREX earnings through increased inflow of foreign direct investments.
“We need to invest more on infrastructure and embark on critical port reforms to reduce bottlenecks in export logistics and processes and boost non-oil production and exports.
“The allocation of N470 billion to revitalise tertiary institutions and enhance salaries of university staff is commendable and at least a show of concern about the plight of the university community in recent times.
“We must accept, however, that the current funding model for our universities is not sustainable in the face of the many revenue challenges being tackled by government.
“A more sustainable way is to grant financial autonomy to the universities with a new emphasis on equity investments for infrastructure.
“We must immediately block revenue leakages by curbing oil theft, pipeline vandalism, and trim excessive fuel, power, gas, and FOREX subsidies.
“Nigeria must also engage in massive tax and duty waivers to lift revenue to between N20 trillion and N30 trillion thresholds from the present N6 trillion to N10 trillion thresholds,’’ Almona stressed.
