A former Director General of the Debt Management Office (DMO), Dr.Abraham Nwankwo has called for the utilisation of public debt to finance Nigeria’s massive infrastructure needs.He said the move wass a paradox because of the existing precarious public debt profile, contending that the resolution of that paradox lies in a creative unbundling of the concept of debt sustainability.
Nwankwo, who was the Guest Speaker at the third Just Friends Club of Nigeria (JFCN) Annual Lecture, in Abuja, said in the context of financing infrastructure for the structural transformation of the economy, distinction should be made between conventional debt sustainability, which is essentially static, and what one would identify as structural debt sustainability, which is based on a forward-looking view of the economy.
He noted that assessment of debt sustainability in the latter case should focus on whether and how the additional debt would be effectively applied to the development of infrastructure, to pull the economy out of backwardness; how it would enable the economy to establish a growth trajectory that will enable it re-gain or enhance debt sustainability and more stable growth, by a forecasted time.
Nwankwo, who spoke on “Realism and Paradox in Financing Nigeria’sHuge Infrastructure Needs”, argued that such plan is a condition-precedent to effective debt financing of infrastructure.
“A robust macroeconomic model with detailed financial programming is perhaps the most important component of the plan documents. It will elicit the trajectory of transformation, breakthrough and self-sustaining growth that would result from the capital injection in big infrastructure development as well as demonstrate how exchange rate risk will be neutralised,” he said.