• Sat. Jul 13th, 2024


Mar 31, 2023


By; Jerome-Mario Chijioke Utomi

It is no longer news that some of the first-term governors-elect will face many months of unpaid workers’ salaries and mounting pension liabilities, as well as agitation for the implementation of the nationally agreed minimum wage, rising inflation, escalating prices of goods and services, and dwindling purchasing power. These incoming governors, about seventeen of them, according to reports will have a difficult time boosting the economies of their individual states because they will take over at least N2.1 trillion in domestic debt and $1.9 billion in foreign debt from their predecessors.

It is equally a common knowledge that in January 2023, Patience Oniha, Director general, Debt Management Office (DMO), while fielding questions from journalists at the public presentation and breakdown of the highlights of the 2023 appropriation act in Abuja, noted that the incoming Federal Government would inherit about N77 trillion as debt by the time President Muhammadu Buhari’s tenure ends in May.

Aside from being an indication that Nigerians should expect tough time ahead or better still, may not anticipate a superlative performance from the incoming administrations as they will from inception be over burdened by debt, what is, however, ‘newsy’ is that each time the present Federal government went for these loans, Nigerians were usually told that the loan  seeks to stimulate the national economy, making it more competitive by focusing on infrastructural development, delivery of inclusive growth and prioritizing the welfare of Nigerians to safeguard lives and property; equipping farmers with high tools, technology and techniques; empowering and enabling mines to operate in a safe and secured environment and training of our youths through revival of our vocational institutions to ensure they are competitive enough to seize the opportunities that will arise for this economic revival.”

From the above, it is evident that the nation did not arrive at its present state of indebtedness by accident but through a well programmed plan of actions and inactions that engineered national poverty and bred indebtedness.  The state of affairs dates back to so many years in the life of the present Federal Government.

To explain; for years, we were as a nation warned with mountains of evidence that this was coming, it was also pointed out that under the present condition of indebtedness, it may be thought audacious to talk of creating a better society while the country battles with the problems of battered economy arising from indebtedness, yet, our leaders who are never ready to serve or save the citizens ignored the warnings describing it as a prank. Now we have learnt a very ‘’useful’’ lesson that we can no longer ignore.

In 2019, the rising debt profile of the country dominated discussion when the Senate opened debate on the general principles of the 2019 Appropriation Bill. Most of the contributors to the referenced debate asked the executive to exercise some level of caution on its borrowing plan in order not to return the country to a heavily indebted nation it exited in 2005 through Paris Club debt relief.

Senate Leader, Senator Ahmed Lawan, (as he then was) kicked off the debate when he read “A Bill for an Act to authorize the issue from the Consolidated Revenue Fund of the Federation the total sum of N8,826,636,578,915 only, of which N492,360,342,965 only, is for Statutory Transfers, N2,264,014,113,092 only, is for Debt Service, N4,038,557,664,767 only, is for Recurrent (Non Debt) Expenditure while the sum of N2,031,754,458,902 only is for contribution to the Development Fund for capital Expenditure for the year ending on 31st day of December, 2019.”

While noting that the budget deficit will be funded through borrowing, Lawan among other things stated; ‘’about 89% of the deficit (N1.65 trillion) will be financed through new borrowings while about N210 billion is expected from the proceeds of privatization of some public enterprises. Debt Service/Revenue Ratio which was high as 69% in 2017 has led to concerns being raised about the sustainability of the nation’s Debt.

Reacting to Lawan’s words, many Nigerians raised the alarm on the country’s rising debt profile. They noted that though the budget estimates should be given expeditious consideration and passage in view of the time already lost, the borrowing plan contained in the Bill should be properly scrutinized. They insisted that scrutinizing the borrowing plan became necessary to prevent the country from exceeding its borrowing limit when juxtaposed with the ratio of Gross Domestic Product (GDP).

Even some Senators in their submissions frowned at the nation’s increased borrowing proposals on our yearly budget which they described as becoming unbearable. “Yes, money must be sought for by any government to fund infrastructure but it must not be solely anchored on borrowing which in the long run, will take the country back to a problem it had earlier solved. “Besides, there are other creative ways of funding such highly needed infrastructure.”

Others at that time were particularly not happy that the debt profile of the country would soon rise to $60 billion from less than $20 billion it was before the present government came to power in 2015.  While they noted that the components of the $60 billion debt profile include $23 billion external debt and $20 billion local debts, these concerned Nigerians observed with dissatisfaction that another $12 billion was already being processed for presentation to the National Assembly to finance Port Harcourt to Maiduguri rail lines.

Still on the 2019 budget borrowing proposal, it noted that “Nigeria is gradually turning to a chartered borrowing nation under this government all in the name of funding infrastructure. “This must be stopped because the future of the country and in particular, lives of generations yet unborn are being put in danger.” Even with the high level of indebtedness of the country, “the government in power is planning to further devalue the Naira to about N500 to one US dollar.” They concluded.

Similarly in February 2022, Economic experts going by media reports urged the Federal Government to seek a debt moratorium and reduce the cost of governance to reduce funds expended on debt servicing, as it stands as the best available option.

This, according to them, will enable the government to suspend payment for now and re-strategize – particularly, the government cannot continue to service its rising debt profile at the expense of meeting the competing needs of the people, a similar expert warning was recently handed by Economic analysts that the Federal Government’s soaring borrowings could eventually suffocate the country if not mitigated.

In the first quarter of 2022 while speaking in Akure, Ondo State capital at the 32nd annual Seminar for Finance Correspondents and Business Editors themed: ‘Exchange Rate Management and Economic Diversification in Nigeria: The Pave Option’ the experts hinted that government’s plans, a fresh N6.3 trillion debt may be added to the current debt stock of N39.556 trillion ($95.779 billion as at December 31, 2021) to ultimately push the country’s total debt stock to N45.86 trillion by December 2022. Notwithstanding this unhealthy trend, they argued it was high time the country invested more in boosting local production and export-oriented infrastructure before the huge debt burden sinks the country.

Indeed, from the above torrents of explanation/concern expressed by these experts, this piece clearly agrees that ‘Nigeria’s debt stock has finally become an issue that calls for more drastic approach to support the fiscal and monetary authorities to tow the nation’s economy out of the doldrums.

Qualifying the above sad account as a bad commentary is the awareness that despite this prophecy of foreknowledge which deals with what is certain to come, and prophesy of denunciation, which on its part, tells what is to come if the present situation is not changed; both acting as information and warning respectively, the President Muhammadu Buhari led Federal Government has become even more entrenched in borrowing, ignoring these warning signals.

In 2020, one of the reputable national newspapers in Nigeria in its editorial comment among other observations noted that Nigeria would be facing another round of fiscal headwinds this year with the mix of $83 billion debt; rising recurrent expenditure; increased cost of debt servicing; sustained fall in revenue; and about $22 billion debt plan waiting for legislative approval. It may be worse if the anticipated shocks from the global economy, like the Brexit, the United States-China trade war and interest rate policy of the Federal Reserve Bank go awry. The nation’s debt stock, currently at $83billion, comes with huge debt service provision in excess of N2.1 trillion in 2019, but set to rise in 2020. This challenge stems from the country’s revenue crisis, which has remained unabating in the last five years, while the borrowings have persisted, an indication that the economy has been primed for recurring tough outcomes, the report concluded.

The situation says something else.

Another news report within the same time frame indicated that the federal government made a total of N3.25tn in 2020, and out of which it spent a total of N2.34tn on debt servicing within the year. This means, the report underlined, that 72 per cent of the government’s revenue was spent on debt servicing. It also puts the government’s debt servicing to revenue ratio at 72 per cent.

It was in the news that PricewaterhouseCoopers, a multinational professional services network of firms, operating as partnerships under the PwC brand, in a report entitled; ‘Nigeria Economic Alert: Assessing the 2021 FGN Budget.’, warned that the increasing cost of servicing debt will continue to weigh on the federal government’s revenue profile. It said, “Actual debt servicing cost in 2020 stood at N3.27tn and represented about 10 per cent over the budgeted amount of N2.95tn. This puts the debt-to-revenue ratio at approximately 83 per cent, nearly double the 46 per cent that was budgeted. This implies that about N83 out of every N100 the federal government earned was used to settle interest payments for outstanding domestic and foreign debts within the reference period. In 2021, the FG plans to spend N3.32tn to service its outstanding debt. This is slightly higher than the N2.95tn budgeted in 2020.”

Today, such fears raised cannot be described as unfounded just as this author doesn’t need to be an economist to know that as a nation, we have become a high-risk borrower.

Looking at the above facts, this piece holds the opinion that the present debt profile presently crushing the country may not have occurred by accident.

And, even as the nation goes on borrowing spree and speeds on ‘borrowing lane’, and at a time the World Bank indicates that “almost half of the poor people in Sub-Saharan Africa live in just five countries: and they are in this order, namely; Nigeria, the Democratic Republic of Congo, Tanzania, Ethiopia and Madagascar, the situation becomes more painful when one remembers that no one, not even the Federal Government can truly explain the objective of these loans and whether they were utilized in the masses best interest.

It would have been understandable if these loans were taken to build standard rail system in the country that will assist the poor village farmers in Benue/Kano and other remote villages situated in the landlocked parts of the country, move their produce to the food disadvantaged cities in the south in ways that will help the poor farmers earn more money, contribute to lower food prices in Lagos and other cities through the impact on the operation of the market, increase the welfare of household both in Kano, Benue, Lagos and others while  improving food security in the country, reduce stress/pressure daily mounted on Nigerian roads by articulated/haulage vehicles and drastically reduce road accidents on our major highways.

Again, it would have been pardonable if the loan were deployed to revitalizing the nation’s electricity sector, to re-introduce a sustainable power roadmap that will erase epileptic power challenge in the country and in its place restore the health and vitality of the nation’s socioeconomic life while improving small and medium scale business in the country.

What about the nation’s refineries?

This piece recalls now with nostalgia that one of the popular demands during the fuel subsidy removal protest in January, 2012, under President Goodluck Ebele Jonathan’s administration, was that the federal government should take measures to strengthen corporate governance in the Nigerian National Petroleum Corporation, NNPC, as well as in the oil and gas sector as a whole. This is because of the belief that weak structures made it possible for the endemic corruption in the management of both the downstream and upstream sectors of the oil and gas industry.

The present administration as part of its campaign promise in 2015, agreed to ensure a better deal for Nigerians, but eight years after such demand was made and Jonathan gone, the three government-owned refineries in the country have not been able to function at full capacity as promised by the present administration.

Today, if there is anything that Nigerians wish that the FG should accomplish quickly, it is getting the refineries to function optimally as well as make the NNPC more accountable to the people. What happened under president Jonathan has become a child’s play when compared with the present happenings in Nigeria’s oil/gas and electricity sectors.

What the above tells us as a country is that more work needs to be done, more reforms to be made; that as a nation, we are poor not because of our geographical location or due to absence of mineral/natural resources but because our leaders fail to take decisions that engineer prosperity. And we cannot solve our socio-economic challenges with the same thinking we used when we created it.

Definitely, this piece may not unfold completely the answers to these challenges, but there are a few sectors that the incoming administration must start from.

The first that comes to mind is the urgent need for diversification of the nation’s revenue sources. Revenue diversification from what development experts is saying will provide options for the nation to reduce financial risks and increase national economic stability; as a decline in particular revenue source might be offset by increase in other revenue sources.

Finally, within this period of economic vulnerability, new awareness that must not be allowed to go with political winds is the expert warning that accumulated debt can hinder a country’s development, especially when most of the revenue generated is used to service debt.