Epunchng - Most read newspaper in Nigeria Wednesday November 15 2017 - Page 48

NFF signs agreement with Eagles P.45 • Iwobi WEDNESDAY, NOVEMBER 15, 2017 www.punchng.com Debt servicing may derail 2018 budget Lekan Sote lekansote@yahoo.com 08050220816 P resident Muhammadu Buhari presented the 2018 budget proposals to a joint session of the Senate and the House of Representatives amidst claps of applause and hums of disagreement last week Tuesday. In real terms, the N8.612tn “Budget of Consolidation” is N5.74tn if you consider the roughly 33 per cent devaluation of the naira – from N199 to N305 to the dollar – in May 2016. One positive of the budget, however, is the plan to reduce the more expensive domestic debt to favour relatively cheaper foreign loans. This reduces the burden of debt servicing, and free bank credits for business. But the resultant use of foreign exchange to service foreign loans hikes exchange rate. You can’t win it all. When foreign exchange becomes less available, and more expensive, the law of supply and demand will apply. It leads to further depreciation of the naira, a ploy by a sly government to devalue the national currency by other means. As you know, when supply is low, and demand is high, the price of a commodity spikes. A visit to Alade Market in Lagos will convince you that the US dollar is not exchanged at the N305 rate decreed by the Central Bank of Nigeria. By the way, Nigeria’s domestic lending market is hostile to local businesses because of the steep interest rate floor which the Monetary Policy Committee of the CBN fixed at 14 per cent. When you add the spread by the banks, interest rate goes out through the roof. 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