Warning: This debt burden is crushing!

Tell the World Bank and the IMF to hold on, and not give Nigeria money for now. Let us internally grow our revenue. It is because of the availability of money to borrow that we are into more debt – Aliyu Ilias, a development economist.

ONE’s sincere worry over Nigeria’s ever escalating debt burden has been exacerbated by the recent request by the federal government, asking the World Bank for a fresh $1.5bn loan. It should be noted that so far, Nigeria has secured a total of $1.95bn in loans from the World Bank in the first four months of President Bola Tinubu’s administration. In specific terms, the first loan was the $750m approved on June 9, 2023 to boost Nigeria’s power sector. The second was $500m meant to help the country’s drive for women’s empowerment and was approved on June 22, 2023. The third was a $700m loan to enhance adolescent girls’ learning and empowerment, and was approved on September 21, 2023. Shocked, are you not? Yes, you should be because getting loans might be sweeter than repaying such. As a reminder, the country’s external debt stock, specifically what it owes non-residents stood at US$41.69 billion in 2022. The country’s public debt stock – what the government owes in total – was about US$100 billion in 2022. Out of these humongous sums, multilateral lenders accounted for almost half of this frightening figure. Eurobonds accounted for about 38% of Nigeria’s external debt. Exim Bank of China accounted for US$4.3 billion, or 86% of the huge $5 billion in bilateral debt.

Perhaps, now you would understand why yours truly got the article titled: ‘Nigeria’s Free Fall into China’s Debt Trap’ published. That was in July 2019. Before then there were related opinion essays such as, ‘Nigeria’s Debilitating Debt Profile’ in 2012 and the other with the quaint question: ‘Who Will Pay these Huge Debts?’ That came in March 2018. Back then in 2012 one had asked how do we explain a situation that has seen the external debt escalating to $6.2 billion, a domestic debt profile ofN6.3trn(as at September 30,2012) yet, state governors were still asking for an additional $7 billion external loan? As reflected also, curiously, Nigeria was then making more money from crude oil sales since the beginning of the Amnesty Programme for the Niger-Delta militants. So, where has all the huge revenues from crude oil sales, multiple taxes including VAT and that from the Custom Service gone? Similar questions resonate more so in our socio-economic landscape, as at this day. But good enough, yours truly is not the only Nigerian worried about the ever jumping debts-both local and foreign. On his part, a political economist, Prof Pat Utomi has similarly cautioned against fresh borrowings by Nigeria. Stressing that the country needed a thorough review of the current loans and how they had been utilized to ensure economic growth he called for a 50 per cent cut in the cost of governance. This has been one’s plea to the powers that be for over a decade.

Also, a development economist, Aliyu Ilias, has raised the timely alarm that with the currency devaluation, the external debt burden would likely double. Instructively, both have called for transparency in the utilization of borrowed funds to act as catalyst for production and boost foreign exchange in the country. How one wished that the policy makers and those who implement them, under the Tinubu-led administration would give a listening era to these clarion calls. But the Federal Government is not the only arm of government so culpable. More alarming is the borrowing spree that has been going on the part of state governors. The situation is so dire that the Socio-Economic Rights and Accountability Project (SERAP) sent an open letter to the erstwhile President Muhammadu Buhari, pleading with to instruct the Director-General and Board of the National Pension Commission [NPC] to stop the state governors’ borrowing right in their tracks. on October 6, 2020. Yet, government revenue as a percentage of GDP declined from 13.5 percent, in 2010-2014 to just 6.9 percent, in 2020. The averages for sub-Saharan Africa and the world in 2015-2020 were 20.1 percent and 24.2 percent, respectively.

Then, the 36 state governors were working towards withdrawing the huge sum of N17 trillion from the Pension Fund. And they claimed that it was meant for infrastructural development! Some two years later, in December 2022, the World Bank noted that states’ debts would rise above 200 per cent of the revenue generated in 2022 and 2023. Furthermore, it warned that there was an increase in debt servicing expenditures of states. That revelation came through the Nigeria Development Update. Furthermore, the World Bank on February 13, 2023 reported that thirty state governors who were going to leave office on May 29, 2023, or seeking re-election had increased their states’ debts to N4.8 trillion! Also coming as a source of serious concern is the fact that the borrowing from banks was about 40.33 per cent of N5.48tn sub-national debt. In addition, credible data which emanated from the Debt Management Office (DMO) showed that the 36 states and the Federal Capital Territory owed about N5.48tn. That was as of March 31, 2023. This was an increase of 13.22 per cent from N4.84tn domestic debt as of March 31, 2022. We should be worried, should we not?

Of course, we should! All because of dwindling revenue, Nigeria’s debt-revenue ratio was 80.6% in 2022, which was far higher than the 22.5% recommended for developing countries by the World Bank. Also, as at August 2022, the International Monetary Fund (IMF), projected that “the Nigerian government may spend nearly 100 percent of its revenue on debt servicing by 2026”. Similarly, the Nigerian Economic Summit Group (NESG), a body of private sector leaders, which warned against what it saw as the prospect of creating “a debt burden for future governments.” And the Council on Foreign Relations stated it in clear term that massive borrowing puts Nigeria’s future at risk. Let it be noted that the World Bank, warned that the country’s debt, is “vulnerable and costly”. The question enlightened Nigerians should be asking now is why is it that the same World Bank has been most willing to offer the Tinubu-led administration loans? The answer is as clear as the sunrise.

So, what is the way out of the economic wood? Let us give a listening ear to the counsel from-Prof. Pat Utomi, which he offered on a television program in September 2021. Said he: “What this country needs is demographic dividends, we need to tap into this huge youth barge by appropriately investing in our young people ….Unless we see these things in this context, the obsession with power will just make us poorer, more miserable, create more insecurity and I think this is the real starting point purpose and not power.’’

This should be food-for-thought for our largely recycled,greedy,old politicians who have shown little concern about the people’s persisting paradox of mass poverty in the midst of natural resources.