The Minister of State for Finance, Yerima Ngama, said on Wednesday that there was nothing wrong with states borrowing funds as long as they would be used for development purposes.
Ngama said this at a two-day National Council for Economic Development (NACOFED) conference in Minna.
According to the minister, there are different kinds of loans which can be financially, economically, socially and politically viable.
“If you have a chance to get resources from development partners who are there to help us, we should do so as long as you have a clear vision that is socially viable, while taking your time to repay.
“So, any government that beats its chest to say that it is not borrowing, it is not right because borrowing is good; it facilitates you to do what you cannot do with your resources.
“That is why it is called leverage. So by borrowing, you are leveraging yourself, though there are some borrowing that are frowned at,” Mr. Ngama said.
Citing an instance, he said if a state government raised bond domestically to undertake projects that were not financially viable and it paid about 18 to 19 per cent interest, “what you are going to use the money for cannot pay for itself”.
“This is what we are trying to discourage.”
He urged other states to emulate Gombe State where the government, instead of borrowing directly, stood in as a guarantor for small and medium entrepreneurs to benefit from loans.
“Gombe State got N1 billion from Bank of Industries and these funds were shared to small and medium entrepreneurs in the state based on the government’s guarantee.
“And these entrepreneurs have done a lot with the funds, going into yoghurt production and so on, so if you do not want to borrow directly, you can develop the private sector.
“Then give the guaranty to the loan as a government so that when they grow and produce, you can now come and tax them,” he said.
The minister said by doing so, states are indirectly building the private sector so that they provide the basis of taxation, to determine revenue generation for the future.
Earlier, the Managing Director, Infrastructure Bank Plc, Adekunle Oyinloye, said Nigeria was truly in need of an overall economic transformation.
Mr. Oyinloye emphasised on the need for government to curtail its expenditure because it had not translated to meaningful development.
“There is need to examine the legal and regulatory framework conditions with a view to encouraging the emergence of fresh sources of capital and news business models for the construction, maintenance and operation of infrastructure.
“Above all, tapping the capital of Nigeria’s N3 trillion pension fund pot is key and provides a win-win solution for both pension fund managers looking for long-term steady investments,” he said.
Mr. Oyinloye said that if all these were achieved, they would turn around the expenditure pattern at the state level and bring investments that would generate revenue in the future.