Peter Obi: FG should restrict borrowing to 5% of previous year’s revenue

Peter Obi, presidential candidate of the Labour Party (LP), says the federal government should restrict borrowings to a statutory 5 percent of the previous year’s revenue.

Obi disclosed this on Thursday on his verified Twitter page, warning that Nigeria must limit borrowing for consumption.

In 2020, the federal government exceeded 3 percent fiscal borrowing threshold because of the COVID-19 pandemic.

The fiscal responsibility law provides a limit of 3 percent debt threshold for sustainability — but the president can “exceed the ceiling if there is a clear and present threat to national security or sovereignty of Nigeria”.

The presidential candidate also warned that most states that received fiscal bailouts did not invest them properly.

“As a matter of urgency, Nigeria must stop borrowing for consumption, but only borrow to invest in regenerative development projects and other productive ventures,” he said.

“It’s ironic that states that received fiscal bailouts did not repay the loans and are still borrowing beyond their revenue earnings.

“Also, it has become imperative to restrict federal borrowings to the statutory 5 percent of the previous year’s revenue.”

In 2021, Obi advised the federal government to invest the funds being borrowed in profitable ventures to enhance the nation’s socioeconomic development.

According to him, debt is not bad when rightly applied and used for investment that will improve the economy, but that borrowing for consumption is bad.

Obi said more people would be thrown into poverty if the government fails to invest in those things that would improve the economy.

TheCable had reported that the cost of servicing debt surpassed the federal government’s retained revenue by N310 billion in the first four months of 2022.

According to the report, the federal government’s total revenue for the period was N1.63 trillion, while debt service gulped N1.94 trillion.