Debt Servicing Depleting Nigeria’s Income

To encourage investment, the Lagos Chamber of Commerce and Industry has advised the Federal and State governments to liberalize the infrastructure sector by breaking government monopolies and securitizing corporate assets through public offers.

The chamber listed multiple recommendations to address the country’s fiscal and financial challenges, including the rising debt service to revenue ratio and moribund assets generating no income, in an official statement released on Sunday titled “Practical steps for boosting revenue and foreign exchange inflows” and signed by the LCCI’s Director-General, Dr Chinyere Almona.

“The country’s debt situation has become concerning, with debt servicing consuming a significant portion of revenue,” it stated. According to the budget implementation report, the debt service to revenue ratio for the period of January to May 2021 was over 98 percent, up from 83 percent in 2020.

“Nigeria is an asset-rich country with hundreds of large state-owned companies, valuable parcels of land, and built structures in prime commercial locations that are grossly underutilized and contribute too little to the country’s fiscal and financial situation because their market values are currently unknown,” the chamber said.

“Corporate assets such as refineries and state-owned enterprises should be securitized via public share issuance to raise equities like Saudi Aramco’s IPO,” the statement stated.

“Physical assets, such as vacant or underutilized properties, could be repurposed and redeveloped to generate revenue.

“Investors should be allowed to commit equity funds to intangible assets such as railways, pipelines, and power transmission.

“A significant investment in skill and talent development to expand the country’s human capital pool. The financialization of Nigeria’s human assets will enhance the economy’s net foreign income and remittance inflows.” The chamber clarified that its recommendations did not imply the sale of national assets, but rather mechanisms to generate more revenue from them without selling them outright.

According to the LCCI, this is a more sustainable method of generating money and increasing foreign cash inflows.