Re: To bor­row or not to bor­row?

The Punch - - MY NEWS.COM -

OHIMA Agan­soliha, New York City, United States, [email protected]: I con­grat­u­late Dr. Oba­diah Mailafia for tak­ing up the shoes of the late Henry Boyo on the back page of The PUNCH. I’m in­clined to en­gage his col­umn, on some mat­ters, start­ing with the case of the na­tion’s $7bn en­trusted to those 14 as­set man­agers.

In 2006, I couldn’t com­ment on the mat­ter. The most im­por­tant ques­tion then would have been, why choose so many as­set man­agers? The as­set man­agers are sim­ply, ex­pe­ri­enced se­cu­ri­ties mar­ket spe­cial­ists with es­tab­lished track records. They are es­sen­tially sim­i­lar to stock­bro­kers; one in­vests their funds, and ex­pects a re­turn on the in­vest­ment. The only mis­take per­haps made was for the Cen­tral Bank of Nige­ria not to have in­vested those funds di­rectly in risk-less as­sets such as trea­sury bonds, bills or notes, as it is prac­tised glob­ally by rep­utable cen­tral banks be­cause of the as­sets’ guar­an­teed re­turn, safety, and also be­cause such prac­tice aligns with the “pru­dent” na­ture ex­pected of cen­tral banks.

Ir­re­spec­tive of the state of those in­vest­ments, hope­fully one agrees that cen­tral banks must re­spon­si­bly pro­vide a state of its in­vest­ments to the leg­isla­tive bod­ies and the pub­lic. It ap­pears ours prefers a dis­crete ap­proach to bank­ing su­per­vi­sion. Also, re­gard­ing bor­row­ing $30bn, as­sum­ing one takes a lin­ear op­ti­mi­sa­tion ap­proach to prob­lems, the con­straints the na­tion faces must be taken into ac­count. Ques­tions to con­sider are: Should the loan fund only crit­i­cally needed projects such as con­sis­tent power? It’s pre­ferred, rather than fund­ing pay­ment of salaries. Or, should it fund bridges as op­posed to power projects?

The chal­lenge still is, who will lend us that amount of money, con­sid­er­ing our un­sound record in in­fra­struc­ture project im­ple­men­ta­tion. Take Greece, for ex­am­ple, it lags be­hind many Euro­pean coun­tries, yet it still con­fi­dently re­ceived large bailouts

(at least $330bn) from the Euro­pean Union.

Why was that? And what dif­fer­en­ti­ates us from Greece?

Per­haps, the EU was con­fi­dent Greece could even­tu­ally re-pay the funds!

Hope­fully, Mailafia’s fu­ture col­umns can pin­point ar­eas the na­tion can con­cen­trate on in­creas­ing its rev­enue sources. Ei­ther from levy­ing taxes on forex, which has been ex­ten­sively prac­tised in the South Amer­i­can coun­tries, or by em­ploy­ing dras­tic ju­di­cial op­tions to ac­cel­er­ate re­cov­ery of pil­fered funds.

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