Shortly before former President Olusegun Obasanjo left office in 2007, Nigeria was almost free from its foreign debts due to his administration’s efforts to repay substantial amounts the country owed the Paris Club of Nations and debts cancellation it secured from the group.
Nigeria’s former Minister of Finance and Coordinating Minister of the Economy, Dr. Ngozi Okonjo-Iweala, was widely believed to have facilitated the engagements that led to the repayment of about $12 billion at the time.
However, when President Goodluck Jonathan administration came on board, the country started borrowing afresh from global financial institutions and other countries to the extent that before he left office, Nigeria’s foreign debts had risen to levels at which most economic analysts and financial experts expressed deep concern.
Obasanjo had expressed concern that less than a decade after almost getting the country out of its debts challenges, his successors, the late Umaru Musa Yar’Adua and Jonathan returned the country to a highly indebted nation.
At the inception of President Buhari’s government on May 29, 2015, Nigerians were hopeful that his administration would clear the country of its debts or at best reduce the nation’s high indebtedness.
But such optimism was dashed as the crash in the price of crude oil in the international market to an all time low of about $20 per barrel, which slightly rose to $30 per barrel and other factors, plunged the country into two recessions.
To get the country out of the recession, the Buhari adminIstration borrowed from China, International Monetary Fund, World Bank, European Bank, the Africa Development Bank (AfDB) and other multilateral financial institutions.
For instance, the government obtained a loan from the Islamic Bank, just as it tied most of other loans such as the Sukuk loan, a non-interest for road infrastructure to capital projects across the country.
Also, the government explained that the facilities obtained from China banks were being used to finance the rail system, power projects and remodeling runways of international airports in the country.
Some of the major road projects that have gulped huge amounts are the Lagos-Ibadan Expressway, the Second Niger Bridge, Abuja-Lokoja Highway, Kano-Kaduna Expressway and several other road projects across the country.
Besides, the Buhari administration told Nigerians that it was using the loans to upgrade the rail projects started by Jonathan’s administration, which it said, accounted for the huge foreign debts.
By and large, China had funded the Lagos-Ibadan, Abuja-Kaduna and the Port Harcourt-Maidugiri rail projects, among others, in collaboration with the Federal Ministry of Transportation headed by former Governor of Rivers State, Rotimi Chinuike Amaechi
The Buhari government also borrowed huge amounts to revive the country’s comatose power sector even as electricity generation and supply continue to depreciate beyond normal levels.
Investigations revealed that in spite of the huge financial investment on the power sector power generation still stands between 3000 and 6000 megawatts, while the national grid had collapsed seven times from around April and June this year.
Curiously, despite protestations by economists, as well as informed and uninformed Nigerians that the level of borrowings by the Buhari government signaled serious danger to the country, the Federal Government and its officials had consistently ignored such concerns.
Government officials had constantly told Nigerians that the loans were being deployed to capital projects and that the projects have the potential of repaying the loans.
The government consistently argued that unlike what obtained during the Jonathan administration when loans were taken to pay salaries and run the government, the current administration was borrowing to fund capital projects.
But the Debt Management Office (DMO), which recently raised the alarm about the country’s rising debt profile, disclosed that Nigeria’s total indebtedness as of the first quarter (Q1) of 2022 has reached N41.60 trillion, which is over $100 billion.
“The new debt figures, compared to the N39.56 trillion and $95.78 billion recorded in December 2021 represented the domestic and external debt stock of the Federal Government, the 36 states and the Federal Capital Territory (FCT), Abuja.
“The total public debt stock includes Federal Government’s fresh domestic borrowing to partly finance deficits in the 2022 Appropriation Act, the $1.2 billion Eurobond issued in March 2022 and disbursements by multilateral and bilateral lenders. There were also increases in the debt stock of state governments and the FCT,” a statement issued by the DMO reads.
The statement added that while the total public debt to Gross Domestic Product (GDP) at 23.27 per cent was below Nigeria’s self-imposed limit of 40 per cent, momentum by the government to grow and diversify revenues remains a priority to ensure that the country sustained its public debt.
“But the truth is that debt becomes a problem, if the revenue base is not strong enough to service the debt sustainably, it invariably becomes a debt problem and possibly a debt crisis,” the statement added.
Management of the DMO expressed deep concern that the country’s debt profile has become a big challenge to those charged with the responsibility of managing the country’s debts.
However, Chief Executive Officer of Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, disagreed with that position, saying government’s rising debt profile raised serious concerns about sustainability.
“When we take account of borrowings from the Central Bank of Nigeria (CBN) and the stock of the Assets Management Corporation of Nigeria’s (AMCON) indebtedness, the debt profile would be in excess of N50 trillion.
“Although the Federal Government tends to argue that the condition is not a debt problem, but a revenue challenge, the truth is that debt becomes a problem if the revenue base is not strong enough to service the debt sustainably,” he stressed.
Yusuf, an economist and immediate past Director-General of the Lagos Chamber of Commerce and Industry (LCCI), said the country was in a serious debt crisis, adding that further borrowing would only further deepen the country’s economic woes.
Lamenting that the country has to now borrow for recurrent purposes, he said: “Government’s actual revenue can now hardly cover the country’s recurrent budget, which implies that the entire capital budget and part of the recurrent expenditure are being funded from borrowing.
“This is surely not sustainable. As of November 2021, debt service to revenue ratio was 76 per cent. The situation had evidently worsened. What is needed is the political will to cut expenditure and undertake reforms that could reduce the size of government, cost of governance and ease the fiscal burden on the government,” he said.
Yusuf restated that it was important to ensure that the loans were been used strictly to fund capital projects, especially infrastructure projects that would strengthen the productive capacity of the economy, adding: “That is the position of the Fiscal Responsibility Act.
Also responding to the development, another economist, Stanley Orosanye, who pointed out that borrowing was not bad in itself, but such loans should be deployed for productive or capital projects, lamented that this was not the case with Nigeria.
“Borrowing is not bad, but what matters most is the reason for the borrowing. Our problem is that we are borrowing to pay salaries and finance wastages. A country that spends nearly one quarter of its budget to subsidise importation of petroleum products is not a serious country.
Another respondent, an editor of a national daily, Kingsley Igho, who spoke to The Trumpet in an interview, said the challenges facing Nigeria today remain its debt service to revenue ratio.
“Nigeria has a revenue challenge, but has continued to borrow not for productive endeavors that will create more jobs and reduce poverty, but to subsidise consumption, corruption and bloated lifestyles of government officials and public servants.
“We have modular refineries that are not being fed with crude oil to end fuel importation which is why we spend all our dollar earnings on payments for fuel imports and subsidy,” he lamented.
Most informed Nigerians, therefore, urge President Buhari to stop further borrowing, especially during the last 11 months of his administration.
It is left to be seen if the Federal Government will look inwards and curb the massive corruption that had been responsible for the borrowings, just as Nigerians expressed the view that a large chunk of the loans end up being diverted into private pockets.
