By Capital Watch Media
A renowned economist, Ayo Teriba, has said that if the federal government is able to attract $50 billion worth of foreign direct investment (FDI) into Nigeria, the country’s inflation rate can be brought down to 5 percent by 2025.
Teriba, who is also the Chief Executive Officer of Economic Associates (EA), speaking on a Television programme, argued that bold reforms aimed at attracting substantial FDI would be transformative.
According to him, such an inflow of investment would strengthen the naira, stabilize exchange rates, and positively influence the country’s macroeconomic indices, which currently exacerbate its inflation woes.
Citing Argentina as an example, Teriba said it is possible for the nation to achieve 5 percent inflation next year.
“5 percent inflation is possible next year. Look at what happened in Argentina. Economists don’t prophesy but make conditional statements.
“If the president can complement the efforts on tax and finance reforms with an investment act to attract $50 billion FDI within the next year, exchange rates will stabilize, and inflation will drop to single digits,” he stated.
According to him, the existing economic policies, particularly those focused on debt servicing, undermine the government’s ability to achieve this target. He pointed out that borrowing to pay off previous debt is counterproductive and fails to address Nigeria’s underlying economic challenges.
“The interest rates offered to Nigeria by international creditors are among the highest globally, primarily due to the country’s poor credit rating. This makes borrowing inefficient and unsustainable as a long-term strategy.”
He called for a shift in the government’s current borrowing practices towards equity-based financing over debt. He noted that many countries with economies comparable to Nigeria’s borrow at significantly lower rates because they issue higher-grade debt instruments.
His words: “There are right and wrong ways of borrowing, and efficient and inefficient methods. The foremost issue is the quality of the debt instruments you issue. Some countries of similar economic size borrow more heavily than we do but at a third of our rates.”
Teriba further argued that Nigeria’s continuous reliance on debt to fund fiscal deficits is unsustainable.
“We should not continue to fund deficits year in, year out with debt. A country with a well-structured balance sheet would prioritize equity over debt.
“If we remain on this trajectory of high-interest borrowing and poor credit management, we’ll miss the opportunity to stabilize our economy. However, if we adopt bold reforms and attract $50 billion FDI, Nigeria can transition to an era of growth and stability,” he added.
