LCCI Suggests Ways To Ease Debt Servicing Burden

The Lagos Chamber of Commerce has noted with worry that the debt situation in Nigeria has “become worrisome”, sharing strategies to aid the tottering economy from heavy debt servicing.

This was shared by the LCCI Director-General, Chinyere Almona, in a statement shared over the weekend after the chamber’s council meeting.

Almona proffered that the Federal Government should substitute the country’s current debt stock with debts that are “asset-linked”, as this would lessen the burden of debt servicing for Nigeria.

Nigeria’s debt service to revenue saw a significant rise between January and May 2021 to 98 percent from 83 percent in 2020, the LCCI DG said.

“The country’s debt situation has become worrisome with debt servicing consuming a significant share of the revenue. The debt service to revenue ratio for the period of January to May 2021 stood at about 98% up from 83% recorded in 2020 according to the budget implementation report,” Almona said.

She added, “There is a need to replace existing debt stocks with asset-linked debt to ease the debt servicing burden; attract greenfield FDI into publicly-listed state-owned companies; generate new revenue streams from commercialized real estate portfolios.”

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The chamber stated that the country had more assets whose value could not be easily identified because they fall under the non-financial category.

It suggested that the government should establish a framework that will allow it properly inventory its assets to raise revenue.

It said, “From a valuation standpoint, assets can be broadly classified into financial and non-financial assets. Financial assets have established market values while non-financial assets refer to those assets with unknown market values.”

“However, most of Nigeria’s assets fall in the non-financial category because the market values of its assets are unknown. As such, they cannot be securitized to raise debt/equities or commercialized to generate revenue.

“Government needs to create a dynamic online digital platform where the financialized and commercialized assets can be offered for investment. This platform will avail private investors of relevant investment opportunities in those assets. Typical examples include Brazilian Partnership for Private Investment (PPI) and the Invest India websites.”