NOT even the most optimistic analyst of Nigeria’s dire finances can paper over the cracks. The country is in a financial mess and, in the absence of urgent and sincere remedial measures, is going downhill. This is not a cynical prognosis; the country currently expends over 99 percent of its revenue on debt servicing even as inflation takes a heavy toll on the hapless populace. Going by the budget performance report prepared by the Office of the Accountant General of the Federation (OAGF) and the Budget Office, out of the N4.26 trillion total revenue available for financing the 2022 budget in the first three quarters of last year, a colossal sum of N4.23 trillion went into debt financing. That puts the country’s debt service to revenue ratio at 99.2 percent. According to news reports, the figure is about 10 percentage points higher than the estimated 80.6 percent (covering January to November) captured in the 2023 budget. The document showed that the Federal Government had expended N5.24 trillion on its debt obligations to local and foreign creditors. Actually, the debt service to income ratio was over 100 percent in the first four months of the year, but there was a subsequent adjustment.
Truth be told, any economy in which 99 percent of revenue goes into debt servicing can consider itself virtually ruined. It is a testament to poor leadership which is in itself a reflection of a skewed leadership recruitment process. Since the return to civil rule in 1999, successive governments have grappled with Nigeria’s humonguous debt profile. While, to its credit, the Olusegun Obasanjo government succeeded in getting the Paris Club to cancel Nigeria’s debts, subsequent administrations failed to cut the country’s coat according to its cloth. They piled up loans instead of looking inwards, undertaking an overhaul of the revenue base and plugging loopholes. But if the administrations before him erred, the Muhammadu Buhari administration made error statecraft. In the eight years that it held the reins, the administration plunged the country into unprecedented debt peonage. Refusing to cut down on the cost of governance and tap into previously uncharted territory revenue-wise, it made the taking of loans the primary economic policy of government, spending money that the country did not have and scoffing at wise counsel.
Surely, the disclosure that Nigeria expended 99.2 percent of its revenue on debt servicing for the year 2022 is a confirmation of the decrepit and unsustainable nature of the economic processes available in the country. Just how could any serious country end up using all its revenue to service—not liquidate or pay back– debts? What revenue is left for the running of the country? Worse still, beyond platitudes, nobody can point to what the loans incurred were actually used for. The fact that the country does not have enough revenue to service or pay back its humongous debts suggests clearly that the loans in question were expended on frivolities. Or how come there is no infrastructure on account of the loans to ginger production, which would have provided taxes and revenue to repay the debts?
Nigeria is certainly in dire straits with the kind of leadership and elite that would, without shame, run the country aground and leave it in debt peonage. Perhaps with the ineluctable effect of the mismanagement of the economy becoming clearer and imposing deep privations, Nigerians will now rise up to the challenge and duty of monitoring and checkmating the excesses of those who impose themselves on them in the name of government. The time has come for the people to demand a higher level of responsibility and responsiveness from all those in government or aspiring to be in government. The present government must apprehend the enormity of the situation and refrain from continuing with the rapacity of past governments while endeavouring to initiate a new template for governance that will result in massive production in the country.
According to the World Bank, in the absence of radical reforms, the proportion of government revenue going into debt servicing will reach 160 per cent in 2027. That is an apparently disastrous prospect. The solution to the debilitating debt situation is the deliberate prioritisation of production and productive activities in the economy; a continuation of the debt spiral can only result in the eventual collapse of the country. The government must encourage production and pursue the diversification of the economy in real terms.
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