Mustapha Chike-Obi Steve Omanufeme Nigeria's public debt to gross domestic product (GDP) at barely 12 percent is far below the international standard of about 60 per cent, which puts the nation's borrowing capacity at about N42 trillion, according to the Managing Director and Chief Executive Officer of the Asset Management Corporation of Nigeria (AMCON), Mustapha Chike-Obi. He disclosed this in Lagos yesterday while delivering a lecture at the Hallmark Policy Forum, organised by Hallmark Newspapers. Chike-Obi said that one of the challenges facing Nigeria's development is capital besides competence and culture. He therefore advocates massive borrowing for capital projects and development."There is nothing wrong with borrowing provided borrowed funds are justly invested", he said, adding that borrowing should be done on project by project basis. Speaking on the topic "Emerging Market Challenges and the Imperatives of Economic Reforms", he said Nigeria still has about N42 trillion to borrow to meet the international stand of 60 per cent of public debt to GDP. "No nation whose debt to GDP ratio is under 60 per cent has achieved meaningful development. The challenge is what we do with the money," he pointed out. He said the Nigerian economy suffers from a tremendous lack of capital for investment in development; hence the nation does things in incremental fashion. Specifically, he pointed out that Nigeria's mortgage problems cannot be addressed by the N100 billion response by the government through the Mortgage Refinancing Company. Instead he said over N2 trillion is needed to meet the current housing gap. He also said that the nation needed $20 billion to build a functioning railway system and another $10 billion to fix transmission lines and build a modern transmission grid. According to him, another major challenge to economic development is culture, which he said has made the nation consumptive instead of productive. He said the culture of an average Nigerian is wasteful with more emphasis on the importation of non-essential foreign goods to fuel a crave for recognition. To this end he advocated a dual exchange rate regime; one for essential goods and the other for non-essential goods. The exchange rate for the importation of non-essential goods, for him, should be prohibitively high to curb penchant for externalities. He lamented that the productive rate for the average Nigerians is pathetically low. "The city of New York, with a population of about one-eight of Nigeria has a GDP three times larger than the country, meaning a resident of the city is 20 or 30 times more productive than the average Nigerian," he said, adding that there is need to create a supportive system for productivity. On competence as a challenge to economic growth, Chike-Obi said it goes beyond having the requisite skill, but including commitment and the humility to reject jobs that one does not have the capacity to handle. He lamented that many people have taken high profile jobs that they knew they cannot handle from the beginning. He voted for growth driven policies, and wonder why the fixation with inflation targeting, that an expansionary monetary policy is desired while managing inflation. He specifically recommended that private sector cash reserve requirements for banks be lowered to six per cent to increase the capacity of banks to lend to the economy. On AMCON, he said the corporation got bigger than most people thought at inception, adding that if people were aware of its footprint and its capacity to create a lot of both economic opportunities and mischief, the appointment of a head of the body would have been fierce. He said the corporation has stabilized and may not be a feature in the financial landscape in more than 10 years to come; adding that the December 2013 refinancing exercise was without any ripple, that another N1trillion refinancing will take place in October this year. Speaking at the sidelines, he said the sale of Enterprise Bank will be concluded by June, while Mainstreet will commence in October, 2014.Dignitaries at the event include the special guest of honour, Dr Oba Otudeko, chairman of the occasion and pioneer Director-General, Professor Anya Anya, amongst others.
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