The Lagos Chamber of Commerce and Industry has described as unsustainable the debt service provision of N2.014tn in the 2018 budget proposal submitted by President Muhammadu Buhari to the National Assembly on Tuesday.
The LCCI, however, commended the commitment of the government to the restoration of the January-December budget cycle, saying it would be good for planning purposes both in the public and private sectors of the economy.
It, therefore, appealed to the National Assembly to ensure a speedy consideration of the appropriation bill in order to normalise the budgetary cycle.
The Director-General, LCCI, Mr. Muda Yusuf, said this would enhance predictability and confidence of investors in the economic management process.
He noted that the 2018 budget proposal of N8.6tn represented an increase of 16 per cent over that of 2017.
“The debt service provision of N2.014tn is 82.6 per cent of total capital allocation and 30 per cent of total revenue. This is clearly on the high side and not sustainable,” he said.
The group said it appreciated the efforts of the government to rebalance the debt portfolio in the light of increasing burden of debt service on its finances and the crowding-out effect of its borrowing on the private sector.
It described the outlook of the macro-economic fundamentals as positive, with the external reserves at $34bn as of October, declining inflation and stability of the exchange rate.
“We welcome the proposal by the government to consolidate on this positive outlook,” Yusuf said.
Noting that the exchange rate assumption of N305 to the dollar was unrealistic, he added, “For all practical purposes, the exchange rate in the economy is between N350 and N365 to the dollar.
“We appreciate the fact that 30.8 per cent of the budget will be allocated to capital projects. The emphasis on infrastructure spending is also being sustained.”
He highlighted the need to further reduce the cost of governance; scale up remittances of surpluses from the Ministries, Departments and Agencies to the coffers of government; refocus the tax drive from direct to indirect taxes in line with the National Tax Policy; and curb the growing incidence of multiplicity of taxes and levies on businesses at all levels of government.
The LCCI DG added, “We welcome the priority accorded to infrastructure in the budget proposal focusing on roads, railways, power projects, water projects and the second Niger Bridge. We welcome the decision to connect the Lagos-Ibadan standard gauge rail line to the Apapa and the Tin-Can Island ports. But time is of the essence.
“There is an urgent need to save the private sector and investors from the agony of persistent gridlock at the Apapa and Tin-Can ports, which account for over 70 per cent of import and export cargoes in the country.”
While noting the assurance of Buhari on the redemption of the promises made to the oil-producing areas of the Niger Delta, Yusuf said, “We commend the renewed commitment to accelerate the ease of doing business reforms. These and more will facilitate the progress and stability of the economy.”
He noted that it was imperative to put in place policies to mobilise private sector capital into the infrastructure space, adding that this should include the broad spectrum of policies like tax, monetary, trade and investment.
“Policy choices that create rent opportunities and distortions should be avoided. The principles of transparency, equity and level playing field should be observed at all times. This is critical for the sustenance of investor confidence,” he said.
The LCCI stressed the need for clarifications on the status of the budgetary appropriation for petroleum subsidy, both for the current fiscal year and 2018.
“It is also necessary to throw some light on the status of the estimated N800bn debt to oil marketers. Investors in this sector would like to see a sustainable framework for the management of petrol subsidy,” Yusuf added.
According to him, there is also a need for clarification on the status of the Asset Management Corporation of Nigeria’s debt estimated at about N5tn within the debt management framework of the government and framework for payment of contractor arrears, which cut across various MDAs.
“The non-payment of the contractor arrears has taken a huge toll on many contractors. Amount involved has been estimated at over N1tn,” he said.