Director-General (DG) of the Debt Management Office (DMO), Ms. Patience Oniha, has challenged state governments in the country to explore Public-Private Partnership (PPP) options for infrastructure financing and avoid borrowing as a major funding source.
She spoke on Tuesday in Lagos at a one-day workshop on Borrowing Guidelines for top Policy under the States Action on Business Enabling Reforms (SABER) Programme for Results with the assistance of the World Bank.
Her words, “Borrowing should not be the major way to source funds. You must up your revenues through increasing your tax revenues.
“Public-private partnerships (PPPs) can help improve Nigeria’s economy by attracting private sector investment and expertise to develop infrastructure and deliver public services.
“This reduces the financial burden on government, accelerates project delivery, and often results in higher quality outcomes. PPPs can also create jobs, stimulate local businesses, and foster innovation.”
Emphasising how critical tax revenue was to the state governments, the DG said it would boost their fiscal health, thereby reducing pressure on them.
According to her, “Efficient tax collection increases government revenue without raising tax rates, ensuring more funds are available for public investment in health, education, and infrastructure.
“Improved compliance and administration reduce leakages and corruption, making the tax system fairer and more predictable.
“Together, PPPs and efficient tax collection boost economic growth, enhance public services, and support sustainable development.
“So revenues are absolutely important. It is important to keep surviving. You must raise revenues. Those borrowings must generate something that generates these revenues.
“Who says government must finance all the bridges and all the roads. That’s an area we have not explored. And we have financial institutions, local and foreign, that will be willing to support such initiatives.
“We are very creative. We need a road across this. Road across this so if we focus on PPP and choose the right parties to work with, not only will we get quality, there will be a timely delivery, and the loans will service themselves, and the government may not have to put in cash.
“Land can be its own equity. Equity doesn’t have to be in cash. So I think we are not looking very closely at PPP. So you see projects loaded in the federal budget, projects loaded in the state government budgets.
“Let’s begin to focus on that. That’s the way forward. We have made some progress with revenues, but we need to do a lot more.”
Prudent utilisation of borrowed funds
The D-G urged state governments to ensure the prudent utilisation of the monies borrowed from creditors, as well as the sustainability of their debts.
She added that the federal government had to work with the states or sub-nationals as to how to borrow, as the nation has one economy, a single Gross Domestic Product (GDP) and is rated as one by ratings agencies as well as creditors.
Avoiding debt distress
The DMO noted that Nigeria had gone through debt crisis in the past and that everything necessary must be done to avoid a repeat.
She said, “This Nation has gone through debt crisis before. I am sure you are all aware. Today, we can talk about Ghana. We can talk about Argentina. We can talk about Zambia and even Sri Lanka.
“But we have been in that situation before. So being part of that situation before which we exited in 2005 under that big debt relief programme that we had, Nigeria as a government, and I commend the leaders we had at that time, put together several laws to govern borrowing to ensure that we don’t get back to those situations or we don’t get into the situations that we’re seeing happening with other countries.”
Ms. Oniha said that the workshop became necessary to acquaint fiscal policy makers at the state level with extant laws and regulatory borrowing requirements.
Lagos to securitise assets
Earlier in his address, the Commissioner of Finance of Lagos State, Mr. Abayomi Oluyomi, disclosed that his state was working on the securitisation of some of its assets.
He did not identify the assets but explained that they would include both liquid and depreciating ones.
Mr. Oluyomi, who lamented that the Naira depreciation by the current administration was responsible for a huge jump in the state’s debt stock, especially the external segment.
He noted that from about $1/N400 before the present administration, the exchange rate jumped to over $1/N1,600, resulting in a huge debt stock for Lagos State without taking any new foreign loan.
The Commissioner said, consequently, Lagos State Government had taken a decision not to take any other foreign loan except concessional loans with repayment period of more than 20 years.
