Uzanu (Edo), 2023: Former Minister of State for Budget and National Planning, Mr Clem Agba, has described as sound and wise policy, the decision by former President Muhammadu Buhari to borrow to fund the economy.
Agba made the assertion in on Tuesday in Uzanu, near Aganebode, Etsako East Local Government Area of Edo.
According to the former minister, the decision by the Buhari administration to borrow was sound and wise economic judgment to grow and sustain the economy of the country.
“Our nation Nigeria was once a very rich country. Though still rich in terms of resources but very poor in terms of money.”
He said Nigeria had one of the lowest GDP the world, adding ” we are second from behind with a revenue GDP of about 7 per cent.
“Yet, we used the few resources that came in to subsidise everything from petrol to power. And there was little or nothing left to put into capital expenditure.”
Agba asked ” how are you going to run a country where the population is growing by the day. Are you not going to build roads, hospitals and provide basic infrastructure for the people?
“And since you don’t have the revenue, it becomes necessary to borrow.”
According to him, there is nothing wrong with borrowing. What is wrong about borrowing is when you are borrowing to fund consumption.
“But if you are borrowing to fund production and you have the capability to pay back, then it’s fine.”
He said Nigeria had never defaulted in its obligation to either pay interest on loans or pay the principal when it was due.
Agba explained that various measures were put in place to find a way to increase the revenue generation.
He noted that Nigeria had serious revenue problem rather than debt challenge.
“People don’t want to pay taxes; they avoid tax as much as it’s possible. Ironically, that is the source for government funding.
“And to shore up the revenue generation, we came up with the Strategic Revenue Growth Initiative.
“With it, we tried to bring in efficiency in our collection system through the Federal Internal Revenue Service.”
Agba explained that ” for the very first time, we hit the N10.4 trillion mark, when the total budget of the Federal Government in 2015, was N4.5 trillion. It showed some level of remarkable progress.”
The former minister, who said that alot had been done with the Customs Service, noted that ” the biggest challenge was not with the system but with its personnel.
“Alot of the officers believe that the organisation is a revenue generating body.
“That is incorrect. Rather, they fail to realise that the organisation is a trade facilitation agency.
“They fail to realise that if they are really able to facilitate trade and the volume of trade increases, so will the revenue increase.
“But unfortunately, their focus was not to facilitate rather, it was more on revenue generation and this reduced the volume of trade.
“Alot of people had to go to neighbouring countries to use their ports and in the process, we lost lots of revenues.
“Those were some of the challenges we had with revenue generation and that was why there was need to borrow. Otherwise, nothing would have been done.
“So, lots of work were done to quicken customs clearance at the port. And that was why government had to invest in scanners at the various ports.
” Instead of doing physical examination, you just run them through the scanner except few instances where there were need to open the containers.
“You want to grow your transportation system? Look at the Lagos-Ibadan rail and the Abuja-Kaduna rail. They were funded by debt borrowing.
“The pertinent question is, is it a free service? No. Revenue will be collected and that becomes string of income to be used to pay back the debt and soon starts yielding income.”
According to Agba, if we continue to borrow to fund those types of projects, in the long run, it will be good for the country.
” And let us remember that there’s time bound value for money. If you wait to do it later, it will have cost you double if not more when next you decide to do it.
“‘Again, there is the issue of costs of the borrowing? They are not commercial loans that attract interest of about 20 per cent or 25 per cent.
” But these are concessionary loans of between 1.5 per cent and 2 per cent and with up to 10 years moratorium. And then, you have between 30 years and 40 years to pay back.
” When you really critically view and compare it with inflationary rate, they are actually grants. Because if inflation is about 20 per cent and you are getting your loan at 20 something per cent.
“You see the difference. And that is why when you are doing commercial loan, it is always higher than your interest rate. That in itself, is savings.
“But taking loans to fund subsidy for instance, was and still a no for me, because there’s no way of paying back; that is taking loans to fund consumption.
“”I have always said that except subsidy is removed, we will be eating away our future, ” he said.