Debt burden:Back to square one

DUE perhaps to the excitement generated by heightened political activity ahead of the forthcoming presidential election, the warning issued last week by the Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) regarding the country’s bloating debt portfolio has yet to receive adequate media coverage. Yet, the Godwin Emefiele-chaired committee’s fears for the economy based on the government’s unchecked appetite for external borrowing ought to command the attention of every Nigerian. Rising from its first meeting for fiscal 2019 on Tuesday 22 January, and echoing worries among experts about the country’s level of borrowing, members of the MPC warned that Nigeria’s debt level “could fast be approaching the pre-2005 Paris Club exit level.”

The 2005 Paris Club exit level refers to the October 2005 deal brokered by two-time former Minister of Finance, Ngozi Okonjo-Iweala, which brought the country an $18 billion reduction on its $30 billion debt to the Paris Club, an informal group of creditor nations including the United States, the United Kingdom, Japan, and key western European and Scandinavian countries. At the time the second largest Paris Club debt deal ever, the 2005 reduction deal was widely hailed by economic experts across the continent and celebrated by Nigerians relieved to see their country secure much-needed relief from its onerous fiscal obligations.

Buhari, Atiku: Zones of strengths, states of weaknesses

There are three major reasons the MPC’s call for caution on the increase in the debt level is cause for concern. First, rising indebtedness, whether at household or country levels, is more often than not a sign of poor financial decision-making. Second, in the case of the Muhammadu  Buhari   administration, the  salt of lack of transparency is added to the wound of poor fiscal management, as it is unclear what exactly the administration has spent the borrowed money on. Third, the rising debt level is particularly jarring because it vitiates otherwise positive trends in the economy as highlighted by the MPC.

Among these are “the observed and recent high foreign capital inflow into the Nigerian economy [which] is evidence of the confidence of the international community in the country’s macroeconomic management;” “stability in the naira exchange rate;” “the gradual reduction in Non- Performing Loans of the deposit money banks (DMBs) which has further strengthened their balance sheets;” and the fact that “although there was an increase in the inflation rate for the second consecutive month, month-on-month inflation continued to moderate, indicating that the year-on-year measures will also moderate in the near term.”

Incidentally, the latest warning from the MPC on the country’s bloating external borrowing is not the first. In September last year, former Minister of Environment, (2015-2016) and Deputy Secretary General of the United Nations (UN), Amina Mohammed, had warned about the Buhari administration’s penchant for borrowing, stating at a public event that: “As I was coming up from New York, some of the concerns that came up from the meeting we had in China just recently and reports that we have, the debt issues are really big. I mean, having experienced what it was for Ngozi Okonjo-Iweala to get debt relief—it took her a few years to convince people, and we are now back again in the country, with a level of debt that is worrying.”

It is painful that, within a generation, Nigeria’s failure to plan and live within its means has put it back on the road to peonage. The Senate and House of Representatives should look into the Federal Government’s spending with a view to curtailing it. “The borrower,” as the Scripture says, “is slave to the lender.”