Senior Analyst at Agusto & Co, Jimi Ogbobine, has advised the Federal Government to take more loans if its plan to fund infrastructure is to be realised.
Ogbobine said this on Sunday at a training for financial journalists during the Finance Correspondents Association of Nigeria (FICAN) 2018 annual workshop in Lagos.
He said that the training, entitled, “Analysis of the Macroeconomic Environment’, organised by Rand Merchant Bank, was meant to deepen journalists’ knowledge of the economy and financial industry developments.
Ogbobine said the bulk of financing for infrastructure would come from borrowing with a larger share being domestic debts.
“The Federal Government borrowing to fund infrastructure is likely to be between N1.2 and N1.6 trillion.
“The implementation is unlikely to start before the second quarter and revenue is likely to be lower than planned.
“Actual funding from asset restructuring, recoveries and others may be substantially lower than the planned level of N2 trillion.
“Therefore, fully funding the capital budget will mean higher than planned borrowing with adverse implications for interest rates and interest costs,” he said.
He added that obligatory spending of the federal government was still more than 100 per cent of revenues, hence, there was no free cash flow for investment in infrastructure.
“Every kobo of infrastructure spending is financed by debt constraints ability to fully fund budgeted amounts.
“Debt as percentage of revenue is significantly higher than the median, of 200 per cent, for countries in Middle East & Africa.
“Federal Government plans to partly finance 2018 capital expenditure with proceeds of asset sales,” he said.
Speaking on inflation, he said a hyper-inflationary environment was one where prices double at least every three years.