RECENTLY, Nigeria’s Minister of Finance, Zainab Ahmed, reportedly stated in an interview that the country’s high debt service is connected with the huge expenditure being incurred in the satisfaction of workers on the government’s payroll. According to media report, she noted as follows: “Our debt service to overall revenue is high because we have a very large expenditure base. We have a large proportion of our budget dedicated to payroll, and Mr. President had decided from the beginning of his administration that we were not going to disengage staff. So, you have to pay salaries, you have to pay pensions. And also, we have to fund the other arms of government, which are the judiciary and the legislature.” Concluding the interview, the Honourable Minister pitched her hopes in the potential rise in oil revenue as a way of earning more revenue and cushioning the effect of the astronomical rise in the nation’s high debt service.
Meanwhile, Nairametrics had, in July 2021, published that the federal government spent a total of N1.8 trillion on debt servicing in the first five months of the year, representing about 98 per cent of the total revenue generated in the same period. A total of N4.86 trillion was spent by the federal government between January and May 2021, from which N206.89 billion was spent as statutory transfers. While recurrent expenditure in the review period stood at N3.67 trillion, debt service was N1.8 trillion. The implication of Nigeria’s ever increasing debt service, however, is that the government is expending nearly all its revenue in servicing recurrent expenditure and debts, consequently causing the federal government to have recourse to foreign loans, and thereby further increasing the nation’s external debt profile.
The relationship between crude oil and astronomical debt service dates to the 70s when the fall in oil prices had a devastating effect on government expenses, thereby causing the government to have recourse to borrowing for payments and project financing. This increased the nation’s debt profile to US$2.2 billion in 1980. However, in 1991, it had risen to $33.4 billion, and rather than decrease, the nation’s debt profile continued to witness an upsurge, particularly with the spate of debt servicing and the insatiable desire of political leaders to obtain loans for the execution of dubious projects. This amount continues to rise even as more external loans are being approved and obtained by the federal government.
A major undermining factor for a country’s economic growth is its huge debt stock and as such, Nigeria’s humongous debts ratio is directly linked to the decades of misrule and financial imprudence of its military and political leaders. With incessant foreign debts being accumulated by successive governments, Nigeria became caught up on crippling foreign debt crisis which, till date, compromised its economic progress and political stability in spite of the paradox of being an oil exporting country.
President Olusegun Obasanjo once identified factors responsible for Nigeria’s debt crises, i.e., ‘political rascality, bad governance, abuse of office and power, criminal corruption, mismanagement and waste, misplaced priorities, fiscal indiscipline, weak control, monitoring and evaluation mechanisms, and a community that was openly tolerant of corruption and other underhand and extra-legal methods of primitive accumulation’. In similar terms, President of the African Development Bank, Dr. Akinwumi Adesina, equally noted that Nigeria is was using about 50 per cent of its revenue to service its debts, compared to the average of 17 percent for other African countries. It is therefore commonsensical to conclude that at this rate, unless by some stroke of luck, Nigeria will not be free from debt anytime soon. Nigeria’s external indebtedness is not only worrisome, but calls for urgent reforms and the adoption of sound economic practice – first which is to stop obtaining any other foreign loans.
Debt crises management and recovered loot
Not too long ago, part of the Abacha loot, amounting to US$4.6billion was repatriated to Nigeria and notwithstanding, this has not had much positive impact on reducing Nigeria’s internal and external debt profile. Out of the repatriated Abacha loot, the federal government recovered US$322 million from Switzerland in 2017 and US$308 million from Jersey Island, United Kingdom in February 2020, with the condition that the funds will be utilized for three major projects in Nigeria, namely: i.Lagos-Ibadan Express Road (Western Region) ii. Abuja-Kano Road (Northern Region)iii. 2nd Niger Bridge (Eastern Region)
The same year, in March 2020, the Nigerian Senate approved a US$22.7 billion loan request and later in May, another US$5.513 billion loan request was sent by the President. Interestingly, the Director-General of the Debts Management Office reportedly noted that year that the coronavirus pandemic might incapacitate Nigeria from servicing its debts appropriately. This is however coming in the wake of over N25 billion internal and external donations which the country has received in its fight against the pandemic.
Regardless, Nigeria’s debt profile under President Muhammadu Buhari rose from N12.1 trillion in 2015 to a whooping N33 trillion in the last quarter of the previous year. I am of the opinion that the recovered Abacha loot can be adequately managed to sustain the deficit in the budget, rather than further plunging the nation into deeper mires of internal and external indebtedness. Over the decades there has been little sustainable development in Nigeria to rationalise the stupendous indebtedness of the country. Rather, successive governments have continued to plummet Nigeria’s external debt portfolio to unfathomable degrees, and sadly, more funds will be borrowed in the nearest future.
While it may not be totally true that the current unresolved debt service crisis is attributable to the payroll of Nigerian workers as stated by the Honourable Minister of Finance, the grand cause of Nigeria’s unresolved debt crisis may not be unconnected to the fact that crude oil revenue, foreign loans and recovered loots are not being fully utilised for recurrent expenditure and development purposes, but for other interests and parochial purposes. It is usually tied to party politics, patronage, and elevation of primordial interest rather than the promotion of national interest and overall socioeconomic development.
Other causes have been identified to be inefficient trade and exchange rate policies, adverse exchange rate movements, adverse interest rate movements, poor lending and inefficient loan utilization, poor debt management practices, and accumulation of arrears and penalties. Certainly, the government can do more to change the status quo and ensure that the country is able to ensure self-sustenance without further recourse to external financing. There is therefore the need to look inwards and adequately manage the country’s debt ratio. The country should place firm restriction on obtaining any other loan. Nigeria is blessed with more-than-enough human and natural resources which, if adequately managed, is capable of sustaining the nation’s infrastructural and socio-economic ideals.
AARE AFE BABALOLA SAN, CON, LL.D (Lond.), FNSE
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