Debt: The destructive attraction

Despite expending 97.7 per cent of its earnings between January and May this year on debt servicing, the Federal Government is yet seeking approval of the National Assembly for $4.179 billion and £710million pounds additional loans. If legislative approval is granted and the facilities are accessed, the loans would push the nation’s public debt almost N2trillion above the June 30, 2021 figure of N35.465 trillion. This is besides the Ways and Means overdraft from the Central Bank of Nigeria and the AMCON liabilities.

According to the Debt Management Office Director General, Patience Oniha, during an interaction with the media this past week, 54.88 per cent of the country’s external debt is owed to multilaterals such as the World Bank Group and the African Development Bank Group. Commercial debt (Eurobonds and Diaspora bond) accounts for 31.88 per cent; bilateral debts owed to China, France, Japan, India and Germany make up 12. 70 per cent, while Promisory Notes account for 0. 54 per cent.

The penchant of the current administration for borrowing is legendary. Its appetite for debt accumulation has increased the nation’s public debt almost three folds from the N12.118trillion it was at the end of May 2015, when the current administration took over, to its current figure. The country’s debt profile grew by over N23trillion in just six years. This has heightened the concerns of many Nigerians who are not only worried about the ability of the government to pay back the debt but are also troubled that the country may find itself in the same quandary it was before the debt forgiveness of 2005 when it was weighed down by debt burden and was unable to properly fund critical sectors such as health, education and infrastructure.

Consequent on the nation’s high debt profile, debt servicing cost has been skyrocketing. In 2014, Nigeria spent N712bn on servicing debt but this rose to N943bn in 2015, N1.48trillion in 2016, N1.84trillion in 2017, N2.014trillion in 2018, N2.09trillion in 2019, this rose to N2.452trillion in 2020.

Two factors are responsible for the wanton hunger of the government for foreign debts. The first is the delusion that the debt to Gross Domestic Product (GDP) ratio is within reasonable limits. Finance Minister, Zainab Ahmed, has said ad infinitum that the nation’s debt, which currently stands at 35 per cent of its GDP, is safe. She has also said, however, that while the country does not have a debt problem it has a revenue problem. But the fact is that it is revenue problem that births debt burden. When a country demonstrates gross lack of capacity to manage its resources, it has set the stage for a resort to borrowing.

The second factor is that with willing lenders such as China and the World Bank Group, those in government do not have to be creative about revenue generation since they can easily access borrowed funds from others. With this mindset, those in leadership, who are supposed to creatively proffer solutions to the societal problems, are, through their lack of creativity and insatiable appetite for loans, mortgaging the future of the country to sustain their current lifestyle. Maybe this is not clear to them but the way those managing the country are stacking up debts, unborn generations of Nigerians are already condemned to long-time servitude.

Therefore, both the federal and state governments need to apply the brakes on their debt accumulation drive. Growing the nation’s debt by over 300 per cent in just six years without growing the economy at the same rate is quite frightening. This trend is particularly worrisome because the current administration promised frugality before its ascension to power. While wooing Nigerians for votes, the All Progressives Congress (APC) had condemned the Jonathan administration for its alleged profligacy with a promise to tread a new path. But what has changed now if in just six years the nation’s debt profile has gone up by over 300 per cent? Perhaps the people would have been comforted by the unprecedented debt increase had there been a corresponding level of development. But which projects were financed with the gargantuan debt? Which structures can we point to as a justification for the ever rising debt? Where are the factories built with the borrowed money? Where are the new jobs created? Where are the hospitals built? Where are the new airports? Where are the new roads? Where has all the money gone? The plain fact is that the governments deployed the bulk of the borrowed money to financing recurrent expenditure. Most of the borrowed trillions went into running the government; paying salaries and allowances. This is not only tragic, it is exceedingly heartrending.

It is quite sad and very saddening that the trend is percolating to the states. Ondo State confirmed during the past week that it had to borrow to pay salaries. It was gathered that this is not peculiar to Ondo State as some other states are in the same dire situation.

If borrowed money is spent on consumption where lays the hope of its repayment? The implication of this is that unless there is a volte-face, the heavy debt burden will slow down development in the country, escalate the people’s poverty and consign future generations of Nigerians into an excruciating debt bondage. The time to stop the excessive borrowing is now. Otherwise, the memory of the present generation of Nigerian rulers by the future generations of Nigerians would invoke not joy, but sadness; not pride but regret; not prayer but curses.

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