Nigeria’s increasing debt stock

IN October 2005, Nigerians heaved a sigh of relief when the Federal Government and the Paris Club announced a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria’s debt stock by $30 billion. The general belief then was that the government would cash in on the opportunity of the debt forgiveness to guard against further actions and inactions capable of returning the country to the days of debt peonage. But years of inept and rudderless leadership have frittered away the scarce resources needed to address critical fiscal deficits and infrastructure decay, and so the debt burden has once again been activated.

Now, the country is groaning under a frightening debt stock aggravated by an unpredictable climate in the international oil market and  a depressing infrastructure base. Between September 2017 and December 2017 alone, the nation’s debt stock increased by N1.327 trillion, principally because of external borrowings by the Federal Government.  The Director General of the Debt Management Office (DMO), Patience Oniha, explained that the increased borrowing was necessitated by the shortfall in oil production and the international prices of crude oil, the nation’s economic mainstay. Nonetheless, she said, the country’s public debt was sustainable, as it was 18.2 per cent of the Gross Domestic Product (GDP). Sadly, though, the country spent N1.6 trillion out of its 2017 budget of N7.2 trillion on servicing debts.

Available statistics from the DMO indicated that, by the end of 2017,  the domestic debt for the Federal Government stood at N12.589 trillion, while the domestic debt of states and the Federal Capital Territory (FCT) amounted to N3.348 trillion. The external debt of the Federal Government, states and the FCT was N5.787 trillion, while the total public debt on December 31, 2017 was N21.725 trillion.  Concerned by the seeming rapacious appetite for external borrowing by the government, well-informed citizens have consistently called for caution, urging the government not to mortgage the future of the country. Similarly, federal agencies like the National Bureau of Statistics (NBS) often raise the alarm, objecting to the gradual descent of the country into the alley of debt.

The fact that such agencies issued such subtle warnings from time to time is instructive. Successive Nigerian governments are not known to have used resources, including external borrowings, to enhance productivity and impact positively on the citizenry. So far, it is arguable that there has been any paradigm shift in view of the despicable state of infrastructure which the government claimed to have intended to upgrade while justifying its borrowing spree. Power and other infrastructure needed for the real sector to thrive and grow remain in precarious conditions.

The government ought to have taken a more practical and realistic step, particularly by reducing the inexplicably high, and indeed rising, cost of governance. The large army of aides attached to public officials and the ungodly allowances should be yanked off. There is no justification for the volume of official vehicles attached to elected and appointed officials. They cost too much to maintain. In any case, there is no evidence that the cost of maintaining the Presidency and government agencies has decreased, and neither have the other arms of government embraced thrift and parsimony. This is a question of political will.

Nigeria’s debt stock rises to N20trn

Given the foregoing, we believe that the Central Bank of Nigeria (CBN) should be more assertive in advising the government against needless borrowing. In the same vein, the Ministry of Finance needs to encourage and ensure fiscal discipline. In addition, the National Assembly should keep the executive in check and prevent it from compounding the misery of Nigerians now and in the future through the accumulation of debts. At the very least, it is duty-bound to ensure that  requests for loans are subjected to stringent, and if possible ‘extreme,’ vetting. There is no way loans can impact positively on the citizenry when they are constantly expended on white elephants and unnecessary expenditures, particularly during election years.