Sowunmi: Local Borrowing for 2017 Budget Will Stifle Growth of SMEs
Racheal Ishaya: The 2017 budget has an expenditure outlay of N7.44 trillion. A breakdown showed that N434.41 billion would be spent on statutory transfers, N1.66 trillion on debt servicing, N177.46 to retire certain maturing bonds, N2.99 trillion on non-debts recurrent, and N2.36 trillion on capital expenditure.
To finance this, the Federal Government said it expected to generate N2.12 trillion from oil revenue and N2.96 trillion from non-oil avenues.
About 11 percent of the expected revenues, which is N558.8 billion is to come from recovered loots and misappropriated funds.
This brings the total projected revenue to N5.08 trillion, leaving a deficit of N2.36 trillion.
The budget deficit is to be financed mainly through borrowings and N2.32 trillion is expected to be sourced externally, while N1.25 trillion will be sourced locally.
A Financial Expert, Akintunde Sowunmi has expressed concern over the strategy the Federal Government has mapped out to finance the N2.36 billion deficit in the 2017 budget.
Sowunmi, who is the Lead Financial Consultant for the Nigerian Association of Small and Medium Enterprises (NASME), made this known in an interview with the News Agency of Nigeria on Tuesday in Abuja.
Sowunmi said borrowing N1.25 trillion from local sources, especially the banking sector, would make it difficult for private businesses to also get credit.
In view of this, he advised government to lean more toward foreign borrowings, adding that it was easier for them to get foreign loans than private businesses.
“I am concerned that the bulk of the deficit will be financed by internal sources and that will significantly crowd out the private sector.
“Government is a big borrower and banks stand to benefit more by doing business with them, so it affects the private sector.
“Entrepreneurs and industrialists who are looking for funds from the market are likely to face challenges because a chunk of the funds will be in government hands to finance the budget deficit.
“The government needs to look elsewhere, particularly the capital market, to raise long term funds to finance infrastructure and they should borrow much more from external sources and leave local borrowing to the private sector,’’ he said.
Sowunmi commended the Federal Government’s decision to use N10 billion for the construction and rehabilitation of more than 65 roads and bridges to enhance transportation system in the country.
“We are curious to see the implementation of the 2017 budget, since it is the first budget since the Federal Government inaugurated the Economic Recovery and Growth Plan.
“It will show us how serious indeed the government is in revamping and growing the economy,’’ he said.