Cloudy Weather Report Ramallah, Palestine +4°C, Cloudy

FG needs more borrowing to fund infrastructure, says expert




The Federal Government is expected to take more loans if its plan to fund infrastructure is to be realised, says a Senior Analyst at Agusto & Co, Mr Jimi Ogbobine.

loans.png

Ogbobine said this on Sunday at a training for financial journalists during the Finance Correspondents Association of Nigeria (FICAN) 2018 annual workshop in Lagos.

He said government was expected to deploy about N1.6 trillion to fund infrastructure this year.

He said that the training, entitled, “Analysis of the Macroeconomic Environment’, organised by Rand Merchant Bank, was meant to deepen journalists’ knowledge of the economy and financial industry developments.

Ogbobine said the bulk of financing for infrastructure would come from borrowing with a larger share being domestic debts.

He also said funding the capital budget would require higher than planned borrowing with adverse implications for interest rates and interest costs for the economy.

“The Federal Government borrowing to fund infrastructure is likely to be between N1.2 and N1.6 trillion.

“The implementation is unlikely to start before the second quarter and revenue is likely to be lower than planned.

“Actual funding from asset restructuring, recoveries and others may be substantially lower than the planned level of N2 trillion.

“Therefore, fully funding the capital budget will mean higher than planned borrowing with adverse implications for interest rates and interest costs,” he said.

He added that obligatory spending of the federal government was still more than 100 per cent of revenues, hence, there was no free cash flow for investment in infrastructure.

“Every kobo of infrastructure spending is financed by debt constraints ability to fully fund budgeted amounts.
“Debt as percentage of revenue is significantly higher than the median, of 200 per cent, for countries in Middle East & Africa.

“Federal Government plans to partly finance 2018 capital expenditure with proceeds of asset sales,” he said.

Speaking on inflation, he said a hyper-inflationary environment was one where prices double at least every three years.

“This means inflation rate of about 25 per cent per annum.

“In such environments, investors hold savings in low inflation currencies like dollars, Pounds Sterling and Euros.

“Also, business persons price products, particularly those with a high import content in these low inflation currencies, usually the dollar.

“In effect, such environments are ‘dual currency environments’.

“Real Gross Domestic Product per capita should grow in 2018, making it easier for businessmen to access forex to fund their operations.

Therefore, most businesses should see top line and profit growths while unemployment rate will fall but the level will remain high,” he said.

The analyst said actual deficit might be lower than planned deficit largely because of a low implementation of the capital budget.

Ogbobine said that based on the long-term inflation difference, the naira-dollar exchange rate should close 2018 at about N420/1 in the Investors & Exporters’ FX Window.

He, however, predicted that should oil revenues increase, the CBN might try to keep rates in the market as close as possible to the current levels.

Ogbobine explained that despite recent contraction in Gross Domestic Product (GDP) growth, Nigeria remained Africa’s largest economy, following rebased GDP figures in 2013.

“Still a viable economy based on long-run projections.

“Significant issues with political stability, terrorism and scattered violence in certain areas.

“Heavily dependent on crude oil exports and facing severe economic challenges with the current global oil market shocks, terrorism threats and attacks on key economic interests,” he said.

The analyst said that average oil price for 2018 would likely be firmer, driven largely by OPEC production cuts, stronger growth, high but declining inventories and political tensions in the Middle East.

“A lot is still contingent on ability to produce and evacuate oil from the Niger-Delta.

“Demand management of imports will continue. If Nigeria is able to produce and evacuate crude, it will build reserves.

“However, some of the reserves will be used to intervene in the Nigerian Autonomous Foreign Exchange (NAFEX) market to keep exchange rates in this market at near current levels,” he added.(NAN)

Tags

No tags for this article
Disclaimer: Opinions expressed here are those of the writers and do not reflect those of nigerianewsgrio.com. nigerianewsgrio.com accepts no responsibility legal or otherwise for their accuracy of content. Please report any inappropriate content to us, and we will evaluate it as a matter of priority.
Loading...




Related Articles

Politics: New text messages show Roger Stone associate Randy Credico may have known more than he was letting on about WikiLeaks' plans during the 2016 election

NBC News published previously unseen text messages between the GOP strategist Roger Stone and the radio host Randy Credico that appear to indicate Credico knew

Politics: The first group of caravan migrants has reached the US border while thousands of others lag behind — here's what awaits them when they arrive

The first groups of caravan migrants have reached the US-Mexico border and are staying in shelters in Tijuana, Mexico. Thousands more lag far behind

Tech: Kanye West shares a photo of him and Zuck singing karaoke — and he says they sang Backstreet Boys (FB)

Tech Kanye West shares a photo of him and Zuck singing karaoke — and he says they sang Backstreet Boys (FB) It's not clear when the photo

Most Watched Videos

View all posts



Most Read News

View all posts

Nigeria’s Education Sector; Lessons From Finnish System By Hammed Jimoh

Before the manipulation came that "power is power", a widely said dictum that transcends all lands and borders is “knowledge is power”. If one means

Strategy: 15 tips for packing your suitcase that will help you save space, avoid wrinkles, and keep your clothes fresh

We compiled 15 great tips for packing your suitcase for anyone going on a trip. They include space-saving measures and the best way to

Over 60 million Nigerians suffer mental illness - FG warns

- Over 60 million Nigerians are suffering from mental illness, the federal government has saidThe federal government also warns against the growing rate of mental

Duke urges sustainable resolution of minimum wage crisis

Calabar – Mr Donald Duke, the presidential candidate of the Social Democratic Party (SDP), has called on the Federal Government to find a comprehensive and

INEC partners Police to recover 2,045 stolen PVCs in A-Ibom

By Chioma Onuegbu Uyo—The Independent National Electoral Commission, INEC, has said that it is partnering the Police to recover the 2,045 Permanent Voters Card (PVCs) stolen

What I know about the reported DSS interrogation of Oshiomhole

- Governor Ibikunle Amosun of Ogun state says he is not involved in the alleged interrogation of Adams Oshiomhole by the DSS- Amosun says if

Most Watched Movies

cron