By Chinyere Joel-Nwokeoma
Some financial experts on Monday urged the Federal Government to ensure effective utilisation of all external borrowings to infrastructure-tied projects for growth and development of the economy.
The experts told the News Agency of Nigeria (NAN) in Lagos that borrowed funds should be invested in projects such as power, rail and roads.
Dr Uche Uwaleke, Head, Department of Banking and Finance, Nasarawa State University, Keffi, told NAN that the loans should be invested in infrastructure in partnership with the private sector to facilitate economic activities.
Uwaleke said that some of the loans should also be invested in agriculture to earn foreign exchange from food exports.
“I do not advise funding social sectors such as education and health with borrowed funds except they come in form of grants,” he stated.
He said that recovered looted funds could be applied to the social sectors.
According to him, the government should tie the funds to only projects with the capacity to pay back.
He stated that the first tranche of 600 million dollars from the African Development Bank (AfDB) should be used strictly for the purpose it was meant, in line with an agreement between the government and the AfDB.
“The provisions of the Fiscal Responsibility Act, 2007 should be adhered to when applying the proceeds of foreign loans to the effect that they must be project-tied,” Uwaleke added.
He said that resorting to external borrowing appeared to be the best option for the country in view of the present economic circumstances.
“We cannot afford to increase taxes neither should we be selling critical assets in order to raise funds to stimulate the economy.
“The huge infrastructure gap in Nigeria justifies the size of the three-year borrowing plan.
“The country still has room for foreign borrowing in view of the low external debt to GDP ratio.
The capacity to service public debt may be weak considering the high debt service to revenue ratio at over 30 per cent.
“However, this is mainly due to the huge domestic debt in our portfolio (over 80 per cent) and the high cost of servicing it,” he said.
Uwaleke urged that the government should not issue Eurobonds now at the international capital market because they could be underpriced with the economic recession and unfavourable global ratings.
Mr Sola Oni, the Chief Executive Officer, SOFUNIX Investment and Communications Ltd., said that investment in infrastructure would be the country’s much-needed and quick-win approach to economic transformation.
Oni said that investment in infrastructure would create an enabling environment, enhance productivity, boost employment opportunities and export promotion drive, generate foreign exchange and strengthen the nation’s currency.
He noted that the capital market was a barometer for the economy, adding that it mirrored the development in the economy.
Oni said that economic transformation would impact positively on the capital market.
“Once the quoted companies are operating optimally, and investors are assured of good returns, there will be flurry of activities.
“The corollary is what we are experiencing now. An efficient market cannot operate at variance with the fundamentals of the economy. Our market is forward looking,” Oni said.
NAN reports that a turnover of 873.84 million shares worth N8.02 billion were exchanged by investors in 15,944 deals last week, against 678.71 million shares valued at N6.88 billion traded in 11,808 deals in the preceding week.
Financial services sector led the week’s activity chart with 654.18 million shares worth N2.84 billion traded in 9,835 deals.
The consumer goods industry followed with 74.72 million shares valued at N4.14 billion achieved in 2,367 deals.
The third place was occupied by the conglomerates industry with a turnover of 61.62 million shares worth N93.37 million transacted in 666 deals.
NAN reports that the All-Share Index during the review period lost 312.61 points or 1.15 per cent to close at 26,981.60 compared with 27,294.21 achieved in the preceding week.
Also, the market capitalisation which opened at N9.375 trillion shed N87 billion or 0.93 per cent to close at N9.288 trillion due to price losses.
Oando recorded the highest loss in percentage terms, shedding 16.73 per cent or 87k to close at N4.33 per share.
University Press followed with a loss of 15.07 or 69k to close at N3.89, while UACN Property lost 13.85 per cent or 43k to close at N2 per share.
Conversely, Learn Africa led the gainers’ table for the week in percentage terms, gaining 23.44 per cent or 15k to close at 79k per share.
Airline Services and Logistics Plc followed with a gain of 15.45 per cent or 34k to close at N2.54, and Okomuoil Palm appreciated by 14.63 per cent or N6 to close at N47 per share.