Why State Governments Should Stay Away From Foreign Loans
The argument to borrow or not borrow is currently ongoing in Nigeria.
But this is even as it concerns the federal government.
As far as the state governments are concerned, someone has a unique perspective entirely.
Chief Executive of BudgIt, Seun Onigbinde believes state governments can borrow but should stay away from foreign loans.
Speaking to financial journalists in Lagos on Tuesday, Onigbinde said states should desist from going for foreign loans because of currency risks.
“We are warning states to be careful of external debts. If it is a local debt, there could be a bailout by the federal government to reschedule your debt. But external debts, you don’t have the luxury of the federal government that receives oil in dollars,” he stated.
Citing an instance, he said, “If you borrowed at 167 naira to a dollar and you are now paying back at 315 naira to a dollar, you are going to be more hit by the currency risk. So, it is a thing that we try to warn states about. So, you don’t see cheap loans and start jumping into it.”
Onigbinde also argued that zero-budgeting system which the current administration promoted at the beginning of their regime can’t work in Nigeria, “because you have thousands of abandoned projects.”
“Zero-based budget is that you are going to start afresh. But we are in a phase of development where most of our projects are rolled over. I think what we need more is the same envelop budget we have been doing, but we need to make it clearer. What we are supposed to do is to make sure that the budget is detailed enough,” he said.
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