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People blaming the government for borrowing are not being sincere – Olowu

According to Olowu, the government must borrow to fund desperately needed infrastructure projects.

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CIBN President, Dr Uche Olowu

The President of the Chartered Institute of Bankers of Nigeria, CIBN, Dr Uche Olowu has said that those blaming the Federal Government over borrowings are not being sincere.

He stated this while speaking on Nigeria’s 2020 Economic Outlook lecture organised by the Finance Correspondents Association of Nigeria, FICAN in Lagos, last week.

Nigeria’s total public debt stock stood at N25.7 trillion at the end of 2019, according to the Debt Management Office, DMO, eliciting concerns from several quarters. But according to Olowu, the government must borrow to fund desperately needed infrastructure projects.

“In 2019, the economy enjoyed cyclical recovery. There was an insufficient growth driver leading to an imbalance in development. Our growth requires new drivers and development needs to be more inclusive. Investment-led philosophy needs to lead the growth and investment-led infrastructure as a growth driver. (For that to happen the government needs resources and that is why people blaming the government for borrowing are not being sincere),” he said.

On the 2020 economic outlook for Nigeria, Olowu said the Nigerian economy will see a gradual uptake in the gross domestic product, GDP, from 2 per cent to 3 per cent.

Also, read Rising Debt, Banking Sector Recapitalisation: Three major issues that will shape Nigeria’s economy in 2020

“Inflationary pressure will continue. Benchmark interest rate will likely remain the same or marginally increase. Level of economic activity from infrastructural investments will increase. There will be a negative return on savings but in the long run, more funding will go into the real sector. The Central Bank of Nigeria will continue to support the naira with the exchange rate hovering between 360/365 naira.

“Unemployment will continue to trend, but production subsidies can help reduce unemployment figures. Diaspora remittances will continue to flow, and foreign direct investment will be inspired by government actions that inspire confidence,” he said.

He said the government will have to fund the economy with borrowing, estimated at 2.5 trillion naira, with domestic borrowing becoming more attractive because of the low-interest-rate environment.

Olowu added that the revenue generation drive will see the government becoming even more bullish on taxation in 2020. He also said the Nigerian border will remain closed, especially if customs continue to generate more revenue as a result of the closure.

Overall, Olowu projected that the Nigerian economy will be better in 2020 than it was in 2019, but a catalytic measure is required.

He, however, recommended that the government needs to be market-oriented to allow more participation from the private sector.

As for the banking sector, Olowu said the banks will continue to survive but would need to become more creative in their lending approach to be profitable.

“The banks know what to do make money. 2020 will be tough for banks relying on easy free money. Many of them are already strategizing on niche areas. Those that identify untapped opportunities will thrive,” he said.

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