Re: To borrow or not to borrow?
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.