Oyibo bankers are telling Nigeria Govt to borrow more!!!!

Imagine this rubbish?

And they want us to issue Derivative-Bonds, the very thing
that is the cause of the "So-Called" Financial Crises in the world today,

I don tire for these people self,

Its a long article but very important, do take time to read!

***********************************

Nigeria's grossly under-borrowed, say experts
By Obinna Chima, 10.31.2010
Monday, November 1, 2010

http://odili.net/news/source/2010/nov/1/207.html

Despite the mounting criticism of Nigeria's debt profile, analysts at Financial Derivative Company Limited (FDC) have argued that the nation is still under-borrowed.

A report titled: 'Bi-Monthly Economic and Business Update,' dated October 29, from the firm, put the nation's total debt at $29.4 billion, as at June 2010, explaining that domestic and external debt accounted for 85.5 per cent and 14.5 per cent respectively.

The Debt Management Office (DMO) said recently that Nigeria's total public debt had risen by 21 per cent in 2009 to $25.8 billion, which represented 13.8 per cent of the country's Gross Domestic Product.

As a result of this, prominent individuals and institutions have raised an alarm on the development in the past few weeks, over the likely nasty economic and political effect on the country, if it is not urgently addressed.

For instance, in September, the immediate past Governor of the Central Bank of Nigeria (CBN), Prof. Charles Chukwuma Soludo, raised the red flag on the economy. He alleged that the economy is staggering and was urgently in need of prescriptions to make it regain its health. Soludo also forecast bumpy roads ahead if excessive domestic and external borrowing and increasing government expenditure are not curtailed.

Similarly, the Managing Director, World Bank Group, Dr. Ngozi Okonjo-Iweala, recently warned that Nigeria's growth may be hampered if the Federal Government does not watch the rising domestic debt profile of the country. Okonjo-Iweala, also cautioned the nation's policy makers to stop the local debt accumulation to prevent unfavourable consequences.

The Former Finance Minister had argued that if the country accumulates a lot of domestic debt, it may crowd out its private sector. But the FDC report said: "Without prejudice to the fast growth in domestic borrowing, Nigeria, it is argued, is grossly under-borrowed."

However, it noted that there are rising threats to the country's fiscal position. The report also warned that regardless of plans by the Federal Government to slice expenditure in next year's budget, following an expansionary fiscal policy of over N5.2 trillion this year, major challenges such as the nature and assumptions of the budget and the quality of spending should be given more attention.

Since the advent of budgeting in Nigeria, the report noted that the country has always adopted inefficient and unrealistic methods of planning at all areas.

"The current debt level which seems innocuous, could de-generate in the manner seen after the civil war. Sadly, the Nigerian economy has lagged behind most of its peers, especially economies in South East Asia. Economic and development indicators suggest a retrogressive trend.

"For instance, the unemployment rate has increased from 13.4 per cent in 2004 to 19.7 per cent in 2009. The infrastructure funding gap remains alarmingly high; and it seems absolutely inconceivable that it can be addressed without resorting to borrowing from domestic and international sources.

If these borrowings are not well managed, Nigeria's debt could spiral out of control and the situation will be similar to that witnessed in the 1990s. This does not bode well for a country on the verge of raising its first sovereign bond from the international market," it warned.

According to the report, the country's greatest economic achievement in the last 10 years was its exit from the Paris club in 2005-2006, adding that the country was then placed in a better fiscal position when its debt declined sharply to $3.5 bilion in 2006 from $36 billion in 2005.

It argued: "Often times the government borrows or receives grants without a detailed plan as to how the funds will be utilised. For example, what specific plan does the government have for the aforementioned $500mn euro bond issue? The plan should be made public. It is time for policy makers to move beyond the rhetoric of fiscal sustainability and begin to take actions necessary to make it work; bearing in mind that oil booms don't last forever."

Commenting on the expectation of the Nigerian capital market for the last two months of the year, the report anticipated slight volatility in the market in the short term, as a result of investors' profit-taking.

It also maintained that the expected migration to the segregated banking model may limit the anticipated gains in the sector, as banks that may be unable to meet up with the prescribed minimum capital base and other regulatory requirements may be forced to spin off some subsidiaries.

"In addition, investors are expected to adopt a wait-and-see approach regarding how the ratified Assets Management Corporation of Nigeria (AMCON) board members will go about valuing banks' toxic assets," it added.