When will the borrowings stop?

DURING the presentation of the 2021 budget, tagged Budget of Economic Recovery and Resilience, President Muhammadu Buhari revealed that the country would borrow the sum of N4.28 trillion to partly finance the N13.08trillion budget as the total expected revenue for the ensuing year is put at N7.886trillion. The president, who hinted that the economy might slide into recession by the end of the third quarter, also stated that the country would be expending N3.12trillion on servicing existing debts.

It is quite a sad commentary on the management capacity of those saddled with the responsibility of steering the wheel of the nation that they have almost returned the country to the league of heavily indebted poor countries after former President Olusegun Obasanjo got a debt relief for the country in 2006, as shortly after the debt pardon for which Nigeria paid $12billion, the country has been piling up debts again.

According to the Debt Management Office (DMO), Nigeria’s debt at the end of June 2020 stood at N31.009 trillion or $85.897billion, excluding the loans taken between end of June and the moment. By the time the N4.28trillion debt proposed for 2021 is added to it, the country’s debt would be almost N40trillion.

One of the factors fueling the government’s seemingly insatiable desire for loans is the belief that the country’s debt to Gross Domestic Product (GDP) ratio is within reasonable limits. Finance Minister, Zainab Ahmed, has said ad infinitum that the nation’s debt, which currently stands at about 20 per cent of its GDP, is safe. She has also said that while the country does not have a debt problem it has a revenue problem.

However, the thinking of those advancing the money to our country is different.

The International Monetary Fund (IMF) has repeatedly warned that the country’s borrowing is a recipe for economic disaster. According to Vitor Gaspar, International Monetary Fund’s Director of Fiscal Affairs Department, Nigeria spends 66 per cent of its tax revenue on debt servicing which denies the country of the necessary resources to build the much needed infrastructure.

Former governor of the Central Bank of Nigeria (CBN), Sanusi Lamido Sanusi, even put it more precisely when he said the nation expends 66 per cent of its total revenue on debt servicing, leaving it with just 34 per cent for both capital and recurrent expenditure. But as disheartening as the two scenarios painted above is, the reality is that in the first quarter of 2020, up to 99 per cent of the revenue realized during that quarter was gulped by debt servicing, leaving the whole country with just one per cent.

The Federal Government has been spending oodles of money on debt financing over the past few years while the debt profile has not declined. In 2016, N1.48trillion went into debt servicing. In 2017, it rose to N1.84trillion and it was N2.014 in 2018. It was N2.09 in 2019 and N2.5trillion in 2020. Altogether, the government has expended almost N10trillion on debt servicing in five years. This money is enough to impact greatly on the nation’s rundown infrastructure, get the country a Dangote-like refinery, improve our health facilities, give us world-class learning facilities and improve the wellbeing of the citizens.

The tragedy, however, is that despite spending this much on debt servicing and missing out on what the money could have given to the country, the debt profile has been rising. The more we pay to service our debts, the higher our debts go. It is the tragedy of a profligate country.

While it is a known fact that it is difficult for countries not to borrow, the problem with our own borrowings is that the effect is not felt by the general populace. Despite the mounting debts the infrastructure is as bad as it has ever been. Which projects can the government point at as the proceeds of the gargantuan debt? Which structures can we point to as a justification for the Mount Everest-like debt? Where are the factories built with the borrowed money? Where are the new jobs created? Where are the hospitals built? Where are the new airports? Where are the new roads? Where has all the money gone? The plain fact is that the governments deployed the bulk of the borrowed money to financing recurrent expenditure. Most of the borrowed trillions went into running the government; paying salaries and allowances. This is not only tragic, it is exceedingly bewildering.

The implication of all this is that unless there is a volte-face, the heavy debt burden will force Nigeria to perpetually chase development without any prospect of catching up with it. How frightening that is!

If President Muhammadu Buhari does not want to go down as the leader that turned Nigeria to Greece or Venezuela, he has to put a stop to this incessant borrowing and evolve a more creative approach to managing the economy. If he fails to do that, it would be difficult for posterity to be kind to him.

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