Borrow and make simultaneous reforms!

Must Read

Airtel Nigeria Unveils New Cheap Data Plans to satisfy consumers growing demand for mobile Internet

… Rolls out 4G in Over 100 Cities, Towns Leading telecommunications services provider, Airtel Nigeria, has announced a massive increase...

Kotoka Ranked Best Airport in West Africa

Ghana's Kotoka International Airport has been adjudged the best airport in West Africa and the fourth-best in the World...

List of Guaranty Trust Bank Sort Codes & Branches (with addresses) in Nigeria

The sort code is a number which usually identifies both the bank and the branch where an account is...
- Advertisement -
- Advertisement -

Remember the Heavily Indebted Poor Countries (HIPC) initiative, launched by the World Bank and IMF in 1996 to ease the debt burden of low-income economies? A total of 37 countries were eligible, mostly in sub-Saharan Africa, and debt relief granted amounted to US$99bn. In isolated cases such as Mozambique, the debt burden is now greater than preceding relief. In many others, it is growing rapidly, prompting warnings from multilaterals, sundry economists and the media of a new ensnarement.

  • The warnings have some validity but are delivered from developed economies with hard and soft infrastructure in place, decent credit ratings and often worse debt ratios.
  • At the FT Africa summit, we attended in London last week, the Ghanaian finance minister, Ken Ofori-Atta, said that the infrastructure gap in Africa required an annual investment of US$90bn to US$120bn. Some estimates are higher still: a figure of US$130bn to US$170bn has been recently attributed to the African Development Bank.
  • The minister’s point was that governments do not have the resources themselves to plug the gap and therefore have to tap loan/bond markets. Their remit is to secure the best terms available among the competing sources of external finance. We understood that playing the China card can lead others to open their sovereign wallets.
  • We can quibble about how much infrastructure finance the African economies can absorb annually due to domestic constraints. It may be no more than US$40bn but governments still need to raise the funds. One possible route lies through FDI. Pravin Gordhan, the South African minister of public enterprises, told the summit that President Cyril Ramaphosa will this week host a conference with the aim of securing the investment of US$100bn over several years.
  • The conference might prove a great success but governments still need to borrow. If they don’t, the gap will widen and the establishment of diversified, modern economies becomes more elusive.
  • If they do borrow on a large scale, they have to make complementary reforms if they are not to return to pre-HIPC debt distress. Above all, they have to boost tax revenue, particularly from the non-oil economy in Nigeria’s case.
  • Debt service’s share of FGN revenue has risen steadily and consumes more funds than capital outlays despite the successful policy of debt externalisation. The infrastructure gap has to be plugged across Africa, however, and we have to trust that governments will make the essential borrowings and reforms.
Read:  Nigeria’s population growing faster than its economy - IMF
Read:  Q3 2018: Akwa Ibom State Reports Highest Unemployment Rate of 37.7% - NBS

 

FBN QUEST

- Advertisement -

Subscribe to BrandSpur Ng

Subscribe for latest updates. Signup to best of brands and business news, informed analysis and opinions among others that can propel you, your business or brand to greater heights.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

LASG Expands Ferry Capacity To Accommodate 480,000 Passengers On Water

The Lagos State Government, through the Lagos State Ferry Services, LAGFERRY, will ferry an average of 480,000 passengers via...

Central African Countries Optimistic About Halving Deaths From Malaria, But Major Challenges Remain

Central African countries surveyed in new opinion study believe that halving malaria deaths is more achievable than elimination by 2030; Malaria experts are very...

Konga Expands Retail Store Outlet, New Stores In Lagos, Uyo, Abuja, PH, Warri

Foremost e-commerce giant, Konga has expanded its growing list of retail stores nationwide, further cementing its place as Nigeria’s only omnichannel retail superstructure. Apart...

Apple, Google Are Again Named Most Valuable Brands In The World- Interbrand

Apple, Google, Amazon and Microsoft again topped Interbrand’s latest brand ranking, the Best Global Brands for 2019. Samsung again came in sixth place following...

More Articles Like This