Will the borrowings ever stop?

Last Thursday, during the presentation of the 2022 budget, tagged Budget of Economic Growth and Sustainability, President MuhammaduBuhari revealed that the country would need to borrow the sum of N4.89trillion to partly finance the N16.39trillion budget. The president also stated that the country would be expending N3.61trillion, almost a quarter of the budget, 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 OlusegunObasanjo 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 March 2021 stood at N33.107 trillion or $87.239 billion, excluding the loans taken between end of March and the moment. By the time the N4.89trillion debt proposed for 2022 is added to it, the country’s debt would be in excess of 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 23 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.

Mrs Ahmed, during an interaction with journalists last Wednesday after the weekly Federal Executive Council (FEC) meeting, said, “Nigeria’s borrowing has been of great concern and has elicited a lot of discussions. But if you look at the total size of the borrowing, it is still within healthy and sustainable limits.”

She added, “If we just depend on the revenues that we get, even though our revenues have increased, the operational expenditure of government, including salaries and other overheads, is barely covered or swallowed up by the revenue. So, we need to borrow to be able to build these projects that will ensure that we’re able to develop on a sustainable basis.”

However, while the minister believes that the country needs to keep borrowing, the thinking of those advancing the money to our country is different.

The World Bank, in  a financial statement for the International Development Association (IDA) released in August, listed Nigeria as one of the countries with high debt risk exposure with an $11.7b IDA debt stock. Similarly, the International Monetary Fund (IMF) has consistently said that the amount of money expended on debt servicing robs the country of the necessary resources to build the much needed infrastructure.

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, N2.5trillion in 2020 and N4.28trillion in 2021. Altogether, the government has expended almost N15 trillion on debt servicing in six 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 because while the current generation of Nigerians suffer the effects of the mismanagement of the loans, the future generations have to bear the brunt of paying back the loans.

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 MuhammaduBuhari does not want to go down as the leader that turned Nigeria to Greece, Lebanon 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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