The latest boom in borrowing appears ill-advised
That the debt being accumulated by both the federal government and the 36 states is growing faster than the rate of the country’s Gross Domestic Product (GDP) is no longer news. What is worrying is that the authorities do not seem to care about the implications of a debt portfolio growing at double-digit at a period the GDP is growing at single digit. That does not bode well for the future of our country.
According to official reports, Nigeria’s debt stock is expected to rise by N6.72tn this year from the 2016 figure of N12.58tn. The total debt liability will also rise to N19.3tn by the end of 2017. Meanwhile, the federal government is still pursuing the idea of securing $30 billion loans from the World Bank, African Development Bank and Japan International Cooperation Agency. The pattern is the same in most of the states. Just recently, Governor Abdulfatah Ahmed of Kwara said the state government will access a $60m loan from the World Bank for rural roads. However, many stakeholders in the state have protested the idea of taking a loan that they believe would not serve the intended purpose.
While Vice-President Yemi Osinbajo said recently that only states with sound financial discipline would now access further assistance from the federal government, we must also note that the fiscal discipline, improved revenue generation, rational allocation and efficient use of resources that he advocated should be the watchword for all tiers of government. For instance, it is a shame that till date Nigerians still do not know how much members of the National Assembly earn.
We must recall that in 2005, Nigeria successfully negotiated a complicated debt write-off deal of about $18 billion after a cash payment of approximately $12bn to free the nation from the Paris Club debts of over $30bn, most of which were accumulated interests and charges. A chunk of the loans were secured in the 1980s to fund what turned out to be white elephant projects and the profligacy of the various administrations at that time.
With about $3bn dollars spent annually just on debt servicing at the time, the argument to exit the club was plausible. The idea was that the funds that would be saved from annual debt servicing would be channelled to productive sectors of the economy and to tackle some of the critical sectors that encompassed the Millennium Development Goals. But 12 years down the line, we are engrossed in another national debate on the appropriateness of treading the debt path again.
We are even more worried by the debts being accumulated by the states. Ordinarily, if the aim is to help the states bridge the gap between what they receive from the federation account and their developmental needs in the areas of infrastructure, health, education, power and transportation, it will be a laudable idea. However, it is one thing to raise these funds and another to ensure accountability and its judicious application. Without the requisite oversight by their respective state legislature, a large chunk of these funds could not be accounted for. In fact, some of the governors inherited states that were heavily indebted on account of debts accumulated by their predecessors.
The current perception of the populace is that majority of the 36 governors have failed to plug the leakages and wastes, which over the years have become institutionalised. If they can do that, there may be no need for some of the debts they keep piling up for future generations to settle. The same applies to the federal government.