By Jerome-Mario Chijioke Utomi
Similar to a February 16, 2022, media report where economic experts urged the federal government to seek a debt moratorium and reduce the cost of governance to cut funds expended on debt servicing because it is the best option at the moment as it will enable the government to suspend payment for now and re-strategies, 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.
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 going by the government’s borrowing 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.
Indeed, from the explanation/concerns expressed by these experts, this piece clearly agrees that ‘Nigeria’s debt stock has finally become an issue that calls for a more drastic approach to support the fiscal and monetary authorities to tow the nation’s economy out of the doldrums.
But what has, however, caused concern is that despite these prophecy of foreknowledge which deals with what is certain to come and prophesy of denunciation, which on its part, tells what is to come if the present situation is not changed; both acting as information and warning respectively, the President Muhammadu Buhari led federal government has become even more entrenched in borrowing, ignoring these warning signals.
There are so many factors that visibly qualify as a tragedy, including the federal government’s obstinacy and inability to adhere to or heed warning signals.
First and very fundamental, 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 in 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 Brexit, the United States-China trade war and the interest rate policy of the Federal Reserve Bank go awry.
The nation’s debt stock, currently at $83 billion, comes with a huge debt service provision in excess of N2.1 trillion in 2019 but is 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.
Second is a recent news report which indicated that the federal government made a total of N3.25 trillion in 2020, 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.
Thirdly, 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 the debt will continue to weigh on the federal government’s revenue profile.
It said, “Actual debt servicing cost in 2020 stood at N3.27 trillion and represented about 10 per cent over the budgeted amount of N2.95 trillion. 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 N3.32 trillion to service its outstanding debt. This is slightly higher than the N2.95 trillion 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.
And even as the nation goes on a 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 explains the objectives of these loans and whether they utilized in the masses best interest.
Take, as an illustration, it would have been understandable if these loans were taken to build a 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, contributes 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 loans were deployed to revitalise 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 live 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 of 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 Company (NNPC) Limited 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 promises in 2015, agreed to ensure a better deal for Nigerians six years after such demand was made and Jonathan has 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 making 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 the 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 a nation desirous of development can 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 a particular revenue source might be offset by an increase in other revenue sources.
Finally, within this period of economic vulnerability, a 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 Jerome-Mario is the Programme Coordinator (Media and Public Policy), Social and Economic Justice Advocacy (SEJA), a Lagos-based non-governmental organization (NGO). He can be reached via [email protected]/08032725374