Ex-Perm Sec Urges Government to Limit Borrowing to High Impact Projects, Scrutinise Process for Loans Disbursement

•Wants problems forcing manufacturing firms to leave Nigeria squarely addressed

Ndubuisi Francis in Abuja

A former Permanent Secretary, Federal Ministry of Finance, Alhaji Aliyu Ahmed has advised the federal and state governments to limit borrowing to high impact infrastructure projects, and to scutinise the process for the disbursement of loans.

Ahmed also urged the government at the centre to squarely addresss the root causes of many  manufacturing companies leaving Nigeria in order to check the obvious negative consequences on the economy.

In an exclusive interview with THISDAY at the weekend,  Ahmed who retired as perm sec in September 2023, obserbed that it’s probably time to hit the pause button on  borrowing. especially borrowing that is  not tied to educational, health and physical infrastructure.

He said: “It’s probably time to hit the pause button on our borrowing programme, especially borrowing not tied to educational, health and physical infrastructure. And even for these, we need to scrutinise the conditions surrounding disbursements of the loans, such as social, environment and governance arraignments.

“Even though most of the loans from Multilateral Development Banks (MDBs) and institutions come with standard loan terms, you must be careful in negotiating conditions around social, environment and governance safeguards attached to the various MDB loans. And we should go for fewer high impact loans and not spread ourselves thin over numerous loans which impact might be very low or trivial.

“If the loans are too many, you will have difficulties monitoring them. The sub-nationals easily fall in to the traps of MDBs’s Staff who approach them directly and literally push loans that sometimes not properly designed. Once they convince the governors of states about certain loans that they could benefit from, they will now allow the governors to do the rest by approaching the Federal Ministry of Finance (FMF) and Debt Management Office (DMO) to convince them. Every efforts by FMF and DMO to convince the states that some of the loans are not properly designed or contain onerous conditions would be seen as time wasting on the part of FMF.

“For other bilateral loans and loans from Export Credit Agencies (ECA), we must do a thorough and diligent work of scrutinizing the loan terms and associated loan conditions.”

The former Permanent Secretary also cautioned that if not tackled squarely, the high exit of manufacturing firms from Nigeria could shrink the gross domestic product (GDP), impact jobs negatively and cause a decline in national income.

He said: “I think the government is trying with some of the policies being put in place and being contemplated. I will cite the example of the Tax Reform Bills 2024.

“When the tax reform takes effect, it will potentially transform the fiscal and development landscape of the government’s fiscal operation as we know it.

“Probably, If I will mention one thing that the government should do differently to fix the economy faster, I think we should look at why manufacturing firms are leaving our shores in droves.

“It is not good and healthy for the economy. If we continue to allow firms to leave at this rate, naturally, it will shrink our GDP, impact jobs negatively and make national income to decline. “We should find out why these firms are leaving and address the problems squarely.”

On Nigeria’s descent from the prime spot of largest economy on the African continent to about number four, Ahmed attributed the decline largely to forex depreciation.

“Forex depreciation is a huge part of it. And the departure of firms is further shrinking the economy. We need to create an enabling environment to bring them back and to attract other players to grow the economy,” he said.

 According to him, there was the need to create  an enabling environment to bring the multinationals that left Nigeria due to harsh operating environment back as well as continue to grow sectors like aviation and service sectors.