The Budget Management Office of the Federation raised an alarm last week on what it termed Nigeria’s “limited borrowing space” which it attributed to the poor debt-to-revenue ratio of the country. It warned that trouble lay ahead of the country if it refrained from heeding this call and exceeded its limits. This was contained in an address made by the Director-General of the Budget Office, Ben Akabueze, to members-elect of the 10th National Assembly during an induction ceremony in Abuja.
This warning can be better appreciated when it is considered that just a few days to his departure from office, President Muhammadu Buhari submitted a request to the National Assembly wherein he sought approval for a fresh loan of $800m from the World Bank. In the words of Akabueze, “You may have heard that we have one of the lowest Gross Domestic Product-to-debt ratios in the world. While the size of the Federal Government’s budget for 2023 created some excitement, the aggregate budget of all the governments in the country amounted to about N30tn. That is less than 15 percent in terms of ratio to GDP. Even on the African continent, the ratio of spending is about 20 percent. South Africa is about 30 percent; Morocco is about 40 percent. And at 15 percent, that is too small for our needs. That is why there is fierce competition for the limited resources.” About the time of this induction ceremony, the President of the Senate, Ahmad Lawan, was reading out the president’s request seeking the lawmakers’ concurrence to his bid to borrow the said money.
Going by the Budget Management Office’s warning, Nigeria’s poor debt-to-revenue ratio has the potentiality to drown the country’s finance base. We have said time and again that the Buhari government’s penchant for borrowing is unhealthy for the economic health of Nigeria. Currently, Nigeria services its national debt with 96.3 percent of its revenue, according to the World Bank. With the Debt Office’s alarm, Nigeria has on its hands a very frightening state of affairs. The realisation that the country is approaching a dangerous point in its debt trajectory should attract the attention of all Nigerians. It should be a subject of concern, especially during this time when the repercussion of this borrowing roulette is beginning to signpost an ensuing state of calamity, especially in the absence of urgent remedial action.
According to Akabueze, “once a country’s debt service ratio exceeds 30 percent, that country is in trouble and is pushing towards 100 percent and that tells how much trouble it (Nigeria) is in. Nigeria has limited space to borrow.” This prognosis is brimming with alarm signals. It is a dire rendition of the consequences of the Buhari government’s unconscionable borrowing and its refrain from thinking outside the box in financing Nigeria’s expenditure. The Budget Management Office’s alert, for want of a scarier epithet to describe it, is frightening. It situates the Nigerian dilemma graphically for all to see. In the last eight years of the Buhari government, borrowing became an apparel that the government wore with magisterial pride, a pastime that signalled an inability to think creatively.
The facts surrounding the country’s debt issue are too glaring to miss or discountenance, given the current use of 96.3 percent of the country’s revenue to service debts. Very few countries of the world find themselves in the unconscionable position that Nigeria occupies, except ones embroiled in internecine wars. This explains why we have always called for drastic action, including cessation of new borrowing, to arrest the drift into debt peonage. Now that one of the official organs of government has publicly spoken on the same issue, we believe that the government will hearken to the voices of reason and apprehend the present unsustainable situation for what it truly is. The Buhari government must be told in clear terms that it is grounding Nigeria to a halt with its incessant and uncontrolled debt bondage. This alert should spur it into realising that its incessant debt is a trap for generations yet unborn. This is made even more pathetic as the government tries to take another debt even in the few days that it has in office.
There is no way the country can afford to carry more debt burdens going forward without entering into a fiscal crisis of monumental proportions. The corollary of such a move is social upheaval whose magnitude cannot be predicted. We urge consequential and drastic action on the debt situation now.
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