The Senate on Monday declared that the total debts profile of Nigeria is now N33 trillion after the approval of $22.7 billion foreign loans requested for by President Muhammadu Buhari penultimate week.
The deputy chairman of Senate Committee on Local and Foreign Debts, Senator Muhammad Bima Enagi, said this during the one-day public lecture on ‘Public Debt in Nigeria: Trend, Sustainability and Management’, organised by the National Institute for Legislative and Democratic Studies (NILDS).
Although borrowing has always served as veritable financial platforms for many countries of the world in running their economies, while judiciously utilising such loans for intended projects and servicing the debts appropriately, Senator Enagi argued that borrowing in developing countries like Nigeria has become a problem.
According to him, from a low ratio of debt to gross domestic product (GDP) of about 3.4 per cent at independence, Nigeria’s total public debt as at September 30, 2019, according to the Debt Management Office (DMO) stands at about N26.2 trillion (or $85.4 billion).
“Of this amount total domestic debt is about N18 trillion (or $58.4 billion) which is 68.45 per cent of the total public debts. With the recent approval of the 2016-2018 External Borrowing Plan, the total debt stock would be about N33 trillion and 21 Debt/GDP ratio.
“The big question in the minds of average Nigerian aware of this fact is What did we do with the money? In other words, where did the money go?
“What do we have to show as a people for these huge debts accumulated over the last four decades or so?”, he queried
In the bid to address the ugly trend, Senator Enagi reiterated the National Assembly’s resolve to monitor the Executive on prompt utilisation of new loans being sought for, in saving the country from going back to pre-2005 and 2006 debt burden era by.
“Consequences of these borrowings is that the sheer magnitude of the Nations Annual Debt Servicing put at about N2.47 trillion for 2020 makes the provision of basic but essential amenities and infrastructure in the country, almost impossible without further borrowings.
“Clearly, Nigeria needs to get its public finance in order to avoid the potential fiscal and financial crisis ahead of the nation. The current debt situation in Nigeria needs to be properly managed and every borrowed Naira or Dollar, carefully deployed, especially in the face of the continued dependence of the nation’s economy on exported crude oil, with its usual price volatility.
“Borrowings must be project tied and not just to support budget deficit. Furthermore, the projects must be such to grow the economy and bequeath laudable infrastructure and not debt for future generations.
“The government must improve on its Internally Generated Revenue (IGR) its Foreign Exchange Earnings and reduce importation of unnecessary goods. To this end, the 9th National Assembly will ensure very effective oversight,” he said.
Speaking also, Director-General of the Debt Management Office (DMO), Mrs Patience Oniha, who earlier expressed fear that economic effects of the coronavirus pandemic may incapacitate the country from servicing its loan appropriately, argued that there was no cause for alarm as regards the total budget profile of the country which is put at $85.390 billion or N26 trillion as at September 2019.
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According to her, though the country’s total debt profile as at 2006 when it exited the Paris and London Club of Creditors was $17.349 million, yearly deficit budgeting and poor revenue generation compelled the country into taking additional loans which accumulated to N26 trillion as at September 2019.
“Concerns have been expressed about the growth in Nigeria’s debt stock since the exit from the Paris and London Club of Creditors. It is true that the Public Debt Stock has grown from US$17,349.69 million in 2006 to USD85,390.82 million as of September 30, 2019.
“However, it must be recognised that the current debt stock is the result of cumulative borrowings by successive governments to finance budget deficits and various Infrastructure Projects,” she observed.
Mrs Oniha further explained that in order to ensure that the public debt is sustainable, the Debt to GDP ratio was set at 25 per cent, lower than the 56 per cent advised by the World Bank and International Monetary Fund (IMF).
She added that the country’s total public debt to GDP has remained within the 25 per cent limit and stood at 18.47 per cent in September 2019.
“This is, however, only one measure of debt sustainability, the other equally important measure is the Debt Service to Revenue Ratio and this is where Nigeria needs significant improvement. Actual Debt Service to Revenue Ratio has been high at over 50 per cent since the year 2015 although it dropped to 51 per cent in 2018 from 57 per cent in 2017.
“The relatively high Debt Service to Revenue Ratio is the result of lower Revenues and higher Debt Service figures.
“Whilst, Nigeria’s debt profile is sustainable, recent developments in the global environment induced by COVID 19, already suggest a less than favourable economic outlook with implications for Nigeria,” she stressed.
Earlier in his opening remarks, NILDS Director-General, Professor Abubakar Sulaiman explained that the objective of the public lecture was to educate and build the capacity of participants, especially members and relevant committees of the National Assembly.
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