Government should halt the journey to another debt trap
Nigeria’s burgeoning public debt stock has become a subject of intense concern and debate within and outside the country. As of September 2019, the debt profile had ballooned to N26.2 trillion, from N25.7 trillion in the corresponding period of 2018. More instructively, the nation’s debt has grown by 214.90 per cent over the past six years. Multilateral institutions as well as individual and corporate analysts have been unrelenting in their call for restraint on the level of borrowing by the country, particularly under the present administration.
At the joint annual spring meetings of the IMF/World Bank in April 2019, concerns were raised over Nigeria’s ability to repay its foreign debt, which was then standing at N24.387 trillion. At yet another forum last October, the IMF called for an effective debt management strategy that would ensure that the amount borrowed posed limited risk and the funds deployed for developmental purposes. The PwC Nigeria in 2019 submitted that the mounting debt profile was worrisome despite the country having about $900 billion worth of dead capital in properties and agricultural lands. Also rising from its recent meeting, the Monetary Policy Committee (MPC) of the CBN cautioned the federal government against hiding under the mantra of debt-to-gross domestic product (GDP) ratio for debt accumulation.
Specifically, the MPC asked the federal government to consider building fiscal buffers against the growing impact of the country’s high debt profile. This position has been reaffirmed by the Nigeria Economic Summit Group (NESG). While concerns heighten, the federal government appears unfazed by the non-partisan calls to check the borrowing spree. Only recently, the Buhari administration sent a request to the National Assembly seeking the approval of another $22.6 billion borrowing to finance some infrastructure projects.
Although the federal government has always pleaded the provision of infrastructure as an alibi for the rising borrowing, not much is visible in various sectors of the economy, due essentially to several constraints. Such constraints include exchange rate volatility, low-interest rate movements, inefficient loan utilisation, and poor debt management practices. Regrettably, whether the loans are well applied or not, meeting debt obligations is a given. Besides, while about 60 per cent of revenue goes into debt service, the roads and other critical infrastructure are in terrible conditions in spite of the borrowing.
The Minister of Works and Housing, Mr Babatunde Raji Fashola lamented recently that for over four years, between 2015 and 2018, his ministry got less than N1trillion with only N73 billion released for roads rehabilitation and construction in 2019. Yet, in the third quarter of 2019, over N606 billion went into debt servicing. Meanwhile, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed has continued to rehash the same lines of her predecessor, Kemi Adeosun even when the revenue profile of the country remains the same.
The federal government should listen to the wise counsel from within and outside the country to halt the journey to another debt trap. We understand the funding challenge but we cannot borrow our way into prosperity. To tackle the revenue challenge, government should consider unlocking finance and economic growth by the commercialisation or privatisation of many dead capital/assets, including the National Arts Theatre; the national stadia in Lagos and Abuja; Tafawa Balewa Square, Lagos; and the Federal Nursing Hospital, Ikoyi, Lagos, among others.
Even if the now familiar refrain by government officials that “Nigeria does not have a debt problem,” is to be taken on its face value, we believe the wise counsel of Benjamin Franklin that “he who goes a borrowing goes a sorrowing,” should provide a useful guide. As it is for individuals, so it is for nations.