The Managing Director of World Bank, Dr Ngozi Okonjo-Iweala, has challenged the Federal Government on the accumulating domestic debt which has reached $26 billion in 2010.
This is to enhance access to credit facilities in the international market by private sector operators and prevent the economy from collapse.
This follows the alarm raised by government officials that Nigeria is still paying back debt of 1960s, contrary to the exit of the country from external debt after the repayment of $30 billion to the Paris Club when Dr Okonjo-Iweala was the Minister of Finance in the Olusegun Obasanjo administration.
She also called for the reduction of deficit budget representing six per cent of the nation’s gross domestic product (GDP).
Dr Okonjo-Iweala, in an interview with journalists on the sideline of the World Bank/IMF meeting in Washington DC, USA, warned that accumulation of domestic debt would harm the economy if it was not stopped by the Federal Government.
She said it was wrong for the government to avoid paying domestic debt that was collected within the country, thinking that it would not have any economic implication.
She said: “Nigeria has to pay attention to domestic debt. Anytime they are talking about Nigeria’s debt, people will begin to shout about external debt, which is not the case.
Internal debt is the problem to talk about, not external debt, which is no longer a problem to Nigeria. The government should stop accumulating domestic debt, thinking that it cannot harm the economy.
That is not true. If you accumulate a lot of domestic debt, first of all it will crowd off the private sector operators when the public sector enters all the time.
“The level we are now, we should not accumulate more domestic debt, so that it will not lead us to where we were before we came out.
It is not only external debt that leads to choking off economic growth and the private sector. We were owing $30 billion to the Paris Club at that time and it has been resolved. External debt is not the case but internal debt is the problem.”
On the controversy over whether the growth figure being claimed by the government was real, she said what mattered was to let the Federal Government be aware of the need to support the finance minister, to have fiscally prudent approach to managing the resources of the country.
On the fears that the excess crude account in Nigeria was rapidly depleted, she said the nation had devised a means of managing the volatility in oil price, with the creation of the Sovereign Wealth Fund.
On the attainment of Millennium Development Goals (MDGs), she said Africa had to focus on growth that would create jobs.