The spate of borrowing is excessive
Already battered by high levels of socio-economic stress, Nigeria’s ever rising debt portfolio is causing increasing anxiety. Unfortunately, authorities in Abuja and the 36 states have continued to sneer at genuine concerns as the loans keep piling up, raising the spectre of another debt trap in future. Going by the latest figures released by the Debt Management Office (DMO), Nigeria’s public debt stock grew by 10.7 per cent in the last quarter of 2023: from N87.91 trillion at the end of September to N97.34 trillion by December 31, indicating a N9.3 trillion rise. The stock comprised the debt incurred by the federal, state, and local governments as well as the Federal Capital Territory (FCT) in the last quarter of 2023.
What recent debt data point to is the precarious fiscal situation of the country. The humongous figures deployed in debt servicing leave little or nothing to execute capital projects. The federal government expended the sum of N4.38trn on domestic debt service in 2023 alone. Another $3.503bn was spent to service the external debt obligations of the federal, state governments and the FCT during the same period.
We concede that the last administration under President Muhammadu Buhari was hobbled by sundry challenges. But it is also common knowledge that the Buhari administration took debt accumulation to a dizzying height. As of 29 May 2015, Nigeria’s sovereign debt was only about N12 trillion. The moment it settled down, that administration went on a borrowing binge such that by the time it left last year, Nigeria’s debt burden had ballooned to a staggering N77trn.
Between 2016 and 2022 (a period of six years), the Buhari government raised total revenues of N26.67trn and spent N60.64trn, leaving a deficit of N33.97trn. To close the gap, the government increased domestic debt from N8.84trn in December 2015 to N44.91trn as of June 2023, while external debt rose from $7.35bn in December 2015 to $37.2bn by June 2023. In what seemed an insatiable quest to incur more debt, the Buhari administration did not only desecrate the spirit and letters of the Ways and Means Advances from the Central Bank of Nigeria (CBN), but it also chalked up a mind-boggling debt of about N30trn.
Unfortunately, despite earlier assurances by President Bola Tinubu and some of his cabinet members to end Nigeria’s over-reliance on borrowing to finance public spending, nothing seems to have changed. In the first four months of the Tinubu administration, Nigeria secured a total of $1.95bn loans from the World Bank. Last December, the Senate also approved Tinubu’s request to borrow the sums of $7.8bn and €100mn as part of the 2022-2024 borrowing plan of the federal government. While these borrowings continue, debt service have been mounting with increased cost of funds and foreign exchange challenges to boot.
What is more disturbing is that the federal and subnational governments have been complicit in profligacy. With a retinue of aides, bloated bureaucracy and immodest lifestyles, public funds are frittered away at every opportunity with ease even when no serious effort is invested towards boosting internally generated revenue mechanisms. Meanwhile, with respect to borrowing and the expansion of fiscal deficit, there is need to strictly adhere to the provisions of extant legislations on government borrowing, especially the Fiscal Responsibility Act 2007 and Central Bank of Nigeria Act, 2007 as it relates to Ways and Means advances, to moderate the growth rate of public debt.
The DMO has also consistently warned against increased borrowing, calling instead, for a radical growth in revenue generation. It is important to heed that counsel.
