By Jerome-Mario Chijioke Utomi
It is no longer news that some of the first-term governors-elect will face many months of unpaid workers’ salaries and mounting pension liabilities, as well as agitation for the implementation of the nationally agreed minimum wage, rising inflation, escalating prices of goods and services, and dwindling purchasing power. These incoming governors, about seventeen of them, according to reports will have a difficult time boosting the economies of their individual states because they will take over at least N2.1 trillion in domestic debt and $1.9 billion in foreign debt from their predecessors.
It is equally a common knowledge that in January 2023, Patience Oniha, Director general, Debt Management Office (DMO), while fielding questions from journalists at the public presentation and breakdown of the highlights of the 2023 appropriation act in Abuja, noted that the incoming Federal Government would inherit about N77 trillion as debt by the time President Muhammadu Buhari’s tenure ends in May.
Aside from being an indication that Nigerians should expect tough
time ahead or better still, may not anticipate a superlative performance from
the incoming administrations as they will from inception be over burdened by
debt, what is, however, ‘newsy’ is that each time the present
Federal government went for these loans, Nigerians were usually told that
the loan seeks to stimulate the national economy, making it more
competitive by focusing on infrastructural development, delivery of inclusive
growth and prioritizing the welfare of Nigerians to safeguard lives and
property; equipping farmers with high tools, technology and techniques;
empowering and enabling mines to operate in a safe and secured environment and
training of our youths through revival of our vocational institutions to ensure
they are competitive enough to seize the opportunities that will arise for this
economic revival.”
From
the above, it is evident that the nation did not arrive at its present
state of indebtedness by accident but through a well programmed plan of
actions and inactions that engineered national poverty and bred indebtedness.
The state of affairs dates back to so many years in the life of the
present Federal Government.
To explain; for years, we were as a nation warned with mountains
of evidence that this was coming, it was also pointed out that under the
present condition of indebtedness, it may be thought audacious to talk of
creating a better society while the country battles with the problems of
battered economy arising from indebtedness, yet, our leaders who are
never ready to serve or save the citizens ignored the warnings describing it as
a prank. Now we have learnt a very ‘’useful’’ lesson that we can no longer
ignore.
In 2019, the rising debt profile of the country dominated
discussion when the Senate opened debate on the general principles of the 2019
Appropriation Bill. Most of the contributors to the referenced debate asked the
executive to exercise some level of caution on its borrowing plan in order not
to return the country to a heavily indebted nation it exited in 2005 through
Paris Club debt relief.
Senate Leader, Senator Ahmed Lawan, (as he then was) kicked off
the debate when he read “A Bill for an Act to authorize the issue from the
Consolidated Revenue Fund of the Federation the total sum of N8,826,636,578,915
only, of which N492,360,342,965 only, is for Statutory Transfers,
N2,264,014,113,092 only, is for Debt Service, N4,038,557,664,767 only, is for
Recurrent (Non Debt) Expenditure while the sum of N2,031,754,458,902 only is for
contribution to the Development Fund for capital Expenditure for the year
ending on 31st day of December, 2019.”
While
noting that the budget deficit will be funded through borrowing, Lawan among
other things stated; ‘’about 89% of the deficit (N1.65 trillion) will be
financed through new borrowings while about N210 billion is expected from the
proceeds of privatization of some public enterprises. Debt Service/Revenue
Ratio which was high as 69% in 2017 has led to concerns being raised about the
sustainability of the nation’s Debt.
Reacting to Lawan’s words, many Nigerians raised the alarm on the
country’s rising debt profile. They noted that though the budget estimates
should be given expeditious consideration and passage in view of the time
already lost, the borrowing plan contained in the Bill should be properly
scrutinized. They insisted that scrutinizing the borrowing plan became
necessary to prevent the country from exceeding its borrowing limit when
juxtaposed with the ratio of Gross Domestic Product (GDP).
Even some Senators in their submissions frowned at the nation’s
increased borrowing proposals on our yearly budget which they described as
becoming unbearable. “Yes, money must be sought for by any government to fund
infrastructure but it must not be solely anchored on borrowing which in the
long run, will take the country back to a problem it had earlier solved.
“Besides, there are other creative ways of funding such highly needed
infrastructure.”
Others at that time were particularly not happy that the debt
profile of the country would soon rise to $60 billion from less than $20
billion it was before the present government came to power in 2015.
While they noted that the components of the $60 billion debt
profile include $23 billion external debt and $20 billion local debts, these
concerned Nigerians observed with dissatisfaction that another $12 billion was
already being processed for presentation to the National Assembly to finance
Port Harcourt to Maiduguri rail lines.
Still on the 2019 budget borrowing proposal, it noted that
“Nigeria is gradually turning to a chartered borrowing nation under this
government all in the name of funding infrastructure. “This must be stopped
because the future of the country and in particular, lives of generations yet
unborn are being put in danger.” Even with the high level of indebtedness of
the country, “the government in power is planning to further devalue the Naira
to about N500 to one US dollar.” They concluded.
Similarly
in February 2022, Economic experts going by media reports urged the Federal
Government to seek a debt moratorium and reduce the cost of governance to
reduce funds expended on debt servicing, as it stands as the best
available option.
This, according to them, will enable the government to suspend
payment for now and re-strategize – particularly, the government cannot
continue to service its rising debt profile at the expense of meeting the
competing needs of the people, a similar expert warning was recently handed
by Economic analysts that the Federal Government’s soaring borrowings
could eventually suffocate the country if not mitigated.
In the first quarter of 2022 while speaking in Akure, Ondo State
capital at the 32nd annual Seminar for Finance Correspondents and Business
Editors themed: ‘Exchange Rate Management and Economic Diversification in
Nigeria: The Pave Option’ the experts hinted that government’s plans, a fresh
N6.3 trillion debt may be added to the current debt stock of N39.556 trillion
($95.779 billion as at December 31, 2021) to ultimately push the country’s
total debt stock to N45.86 trillion by December 2022. Notwithstanding this
unhealthy trend, they argued it was high time the country invested more in
boosting local production and export oriented infrastructure before the huge debt
burden sinks the country.
In 2020, one of the reputable
national newspapers in Nigeria in its editorial comment among other
observations noted that Nigeria would be facing another round of fiscal
headwinds this year with the mix of $83 billion debt; rising recurrent
expenditure; increased cost of debt servicing; sustained fall in revenue; and
about $22 billion debt plan waiting for legislative approval.
It may be worse if the anticipated
shocks from the global economy, like the Brexit, the United States-China trade
war and interest rate policy of the Federal Reserve Bank go awry.
The
nation’s debt stock, currently at $83 billion, comes with huge debt service
provision in excess of N2.1 trillion in 2019, but set to rise in 2020. This
challenge stems from the country’s revenue crisis, which has remained unabating
in the last five years, while the borrowings have persisted, an indication that
the economy has been primed for recurring tough outcomes, the report concluded.
The situation says something else.
Another news report within the same time frame indicated that
the Federal Government made a total of N3.25 trillion in 2020, and out of which
it spent a total of N2.34 trillion on debt servicing within the year. This
means, the report underlined, that 72 per cent of the government’s revenue was
spent on debt servicing. It also puts the government’s debt servicing to
revenue ratio at 72 per cent.
It was in the news that PricewaterhouseCoopers, a multinational
professional services network of firms, operating as partnerships under the PwC
brand, in a report entitled; ‘Nigeria Economic Alert: Assessing the 2021 FGN
Budget.’, warned that the increasing cost of servicing debt will continue to
weigh on the federal government’s revenue profile. It said, “Actual debt
servicing cost in 2020 stood at N3.27tn and represented about 10 per cent over
the budgeted amount of N2.95tn.
This puts the debt-to-revenue ratio at approximately 83 per cent,
nearly double the 46 per cent that was budgeted. This implies that about N83
out of every N100 the Federal Government earned was used to settle interest
payments for outstanding domestic and foreign debts within the reference
period. In 2021, the FG plans to spend N3.32tn to service its outstanding debt.
This is slightly higher than the N2.95tn budgeted in 2020.”
Today, such fears raised cannot be described as unfounded just as
this author doesn’t need to be an economist to know that as a nation, we have
become a high-risk borrower.
Looking at the above facts, this piece holds the opinion that the
present debt profile presently crushing the country may not have occurred by
accident.
And,
even as the nation goes on borrowing spree and speeds on ‘borrowing lane’, and
at a time the World Bank indicates that “almost half of the poor people in
Sub-Saharan Africa live in just five countries: and they are in this order,
namely; Nigeria, the Democratic Republic of Congo, Tanzania, Ethiopia and
Madagascar, the situation becomes more painful when one remembers that no one,
not even the Federal Government can truly explain the objective of these loans
and whether they were utilized in the masses best interest.
It would have been understandable if these loans were taken to
build standard rail system in the country that will assist the poor village
farmers in Benue/Kano and other remote villages situated in the landlocked
parts of the country, move their produce to the food disadvantaged cities in
the south in ways that will help the poor farmers earn more money, contribute
to lower food prices in Lagos and other cities through the impact on the
operation of the market, increase the welfare of household both in Kano, Benue,
Lagos and others while improving food security in the country,
reduce stress/pressure daily mounted on Nigerian roads by articulated/haulage
vehicles and drastically reduce road accidents on our major highways.
Again, it would have been pardonable if the loan were deployed to
revitalising the nation’s electricity sector, to re-introduce a sustainable
power roadmap that will erase epileptic power challenge in the country and in
its place restore the health and vitality of the nation’s socioeconomic life
while improving small and medium scale business in the country.
What about the nation’s refineries?
This
piece recalls now with nostalgia that one of the popular demands during
the fuel subsidy removal protest in January, 2012, under President Goodluck
Ebele Jonathan’s administration, was that the Federal Government should take
measures to strengthen corporate governance in the Nigerian National Petroleum
Corporation, NNPC, as well as in the oil and gas sector as a whole. This is
because of the belief that weak structures made it possible for the endemic
corruption in the management of both the downstream and upstream sectors of the
oil and gas industry.
The present administration as part of its campaign promise in
2015, agreed to ensure a better deal for Nigerians, but eight years after such
demand was made and Jonathan gone, the three government-owned refineries in the
country have not been able to function at full capacity as promised by the
present administration.
Today, if there is anything that Nigerians wish that the FG should
accomplish quickly, it is getting the refineries to function optimally as well
as make the NNPC more accountable to the people. What happened under president
Jonathan has become a child’s play when compared with the present happenings in
Nigeria’s oil/gas and electricity sectors.
What the above tells us as a country is that more work needs to be
done, more reforms to be made; that as a nation, we are poor not because of our
geographical location or due to absence of mineral/natural resources but
because our leaders fail to take decisions that engineer prosperity. And we
cannot solve our socio-economic challenges with the same thinking we used when
we created it.
Definitely, this piece may not unfold completely the answers to
these challenges, but there are a few sectors that the incoming administration
must start from.
The first that comes to mind is the urgent need for
diversification of the nation’s revenue sources. Revenue diversification from
what development experts are saying will provide options for the nation to
reduce financial risks and increase national economic stability; as a decline
in particular revenue source might be offset by increase in other revenue
sources.
Finally, within this period of economic vulnerability, new
awareness that must not be allowed to go with political winds is the expert
warning that accumulated debt can hinder a country’s development, especially
when most of the revenue generated is used to service debt.
*Utomi is the programme
coordinator (Media and Public Policy), Social and Economic Justice Advocacy
(SEJA). Jeromeutomi@yahoo.com/08032725374 .
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