Nigeria’s Debt and the Courage of Patience Oniha
RingTrue By Yemi Adebowale
Nigeria is struggling to borrow from international markets because global lenders and investors are shunning countries with “Category B” economic ratings. These are countries with low creditworthiness. Beloved Nigeria is in this club, no thanks to over seven years of binge-borrowing by the Buhari government. International capital markets are no longer fully open to countries like ours. So, Nigeria is experiencing difficulties accessing new foreign loans. This is the truth the Director-General of the Debt Management Office (DMO), Patience Oniha picked up courage to tell the Buhari government last Monday.
To be honest, I was shocked by Oniha’s decision to speak truth to power. Twice, I have had cause to excoriate this brilliant woman and her debt management office for not being truthful about the Buhari government’s reckless borrowings. But now, she has decided to stand up for what is right. Madam Oniha has decided to be honest no matter whose ox is gored. The borrowings have been endless and needless.
The DMO boss, who was at the House of Representatives’ Committee on Aids, Loans and Debt Management, to defend her agency’s 2023 budget, noted that the federal government had not been able to meet its external borrowing target and was now looking at lenders in the United States and Europe.
She declared, “Where there is an issue is the new external borrowings. What was provided for in the 2022 budget is N2.57 trillion of new external borrowings and this, at the budget exchange rate, is $26 billion. The reality is that if it were before, by now we would have issued Eurobonds to raise the money and we would be in good business. But let us say from the fourth quarter of last year, the international capital markets have not been opened to countries like Nigeria. So, in 2021, there was about $6 billion to raise. We raised $4 billion for that one.
“The international markets are not looking for countries with our ratings – B ratings. The invasion of Ukraine by Russia, as you know, turned around things in the world significantly. So, inflation rates are high, interest rates are high and investors are saying there is a lot of uncertainties as to what will happen. There is a threat of recession. So, what they have decided to do is to put their money in the G-7 securities: United States, Germany, France, Japan, and so on. These countries also issue bonds. That is where the investors are putting their money and rates have gone up significantly.”
The Director-General of the DMO avowed that Nigeria must gear up its revenue drive while looking for alternative sources of funds internationally. “We really can’t survive like this,” she stated.
On debt sustainability, the DMO boss stated that the government must pay attention to the percentage of deficit in its annual budgets: “We really need to look at revenues. For debt to be sustainable medium term, you must earn revenues. We should not have a budget of N17 trillion and N10 trillion of deficit, and out of that, there is new borrowing of N8.8 trillion, which is 50 per cent of your budget.”
No doubt, excessive borrowings by the Buhari government have put beloved Nigeria in a mess. This country is already mulling renegotiation of its repayments due to dwindling revenue. Two global economic analysts and ratings bodies, Moody’s and Fitch, recently downgraded Nigeria to Category ‘B’ economy. That is what countries with badly-managed economies get. It is shocking that the Buhari government again reflected ineptitude in the junk submitted as 2023 federal budget on October 7.
The total fiscal operations of the federal government in 2023 is expected to result in a deficit of N10.78 trillion. This represents 4.78 per cent of Nigeria’s estimated GDP and above the three per cent threshold set by the Fiscal Responsibility Act 2007. Buhari has decided to sink Nigeria into bigger debt with Budget 2023 because the deficit would be financed mainly through borrowings, totaling N8.80 trillion. This same Nigeria is expected to spend N6.31 trillion servicing debt in 2023. The budget has a paltry N5.35 trillion for capital expenditure. The money expected to go into debt servicing is more than what is set aside for capital projects. New borrowings will be greater than the expected revenue. What a budget!
Last year, the federal government spent 76 per cent of its revenue on debt servicing. This may jump to 92 per cent this year as predicted by the IMF. Nigeria’s debt-servicing obligation in relation to its revenue is now far above World Bank’s suggested 22.5 per cent for low-income countries like ours.
I’m thoroughly embarrassed by the Buhari government’s thoughtless borrowings. It is heart-wrenching. So sad that total public debt stock, comprising federal, state and local governments, as at December 31, 2021, is N39.556 trillion. The comparable figure for December 2020 was N32.915 trillion. It is pertinent to note that the federal government is responsible for the bulk of this country’s public debt. For example, 83.78 per cent of the nation’s debt stock, as at December, 2020, belongs to the federal government.
All we hear today in Nigeria is humongous borrowing figures without commensurate impact on the country; huge borrowings without development. In practical terms, let’s all look around us; in our homes and those of our neighbours. Of course, we will see an army of unemployed youths. Things have deteriorated in over seven years of the Buhari government, the huge loans notwithstanding.
We have to be honest, maybe few new jobs here and there; but if we are talking about creating a huge number of jobs for our youths with these loans, there is nothing like this. The facts and figures are there.
The last time the National Bureau of Statistics (NBS), picked up courage to release figures on unemployment was Q4 of 2020 and it reported that Nigeria’s unemployment rate rose from 27.1 per cent in the second quarter of 2020 to 33.3 per cent in the fourth quarter of 2020, translating to 23.19 million unemployed people.
The Buhari government has piled up harms with wild borrowings. That was why the IMF projected that the federal government may spend 93 per cent of its revenue on the payment of interests incurred on its debts by 2022, adding that a high interest-to-revenue ratio puts the country at fiscal risk.
This government has evidently borrowed beyond its repayment convenience. It admitted this much sometime last year, saying it spent N1.8 trillion on debt servicing from its N1.84 trillion revenues in the first five months of 2021 – January to May. This puts the federal government’s debt-servicing-to-revenue ratio, a key measure of debt sustainability, at 97.8 per cent for the reviewed period. Is this not scandalous?
I can clearly remember the IMF urging the Nigerian government to implement timely fiscal reforms. IMF’s Mission Chief for Nigeria, Ms. Jesmin Rahman, noted during a briefing on Nigeria’s 2021 Article IV Consultation Staff Report that the increase in Nigeria’s public debt had grown rapidly in 10 years and was approaching a time when the country would spend all its income on servicing debts.
Rahman added: “There are a couple of other points that we should remember…Nigeria’s debt carrying capacity is very low. For us, revenue levels are low compared to a typical emerging market country that spends less than 10 per cent of revenues on interest payments.”
Even Buhari’s Economic Adviser, Dr. Doyin Salami, agrees that the borrowings of this government are not sustainable. Salami, in a presentation on “The State of the Economy,” last year, pointed out that the federal government’s expenditure had been on the increase, and at a faster pace than its revenue. He added that public debt had continued to expand on the back of growing fiscal deficit. His alarm came months before that of the IMF.
Experts expect the federal government to offset the negative consequences associated with its rising debt profile by cutting unnecessary expenditure from its budget. But this government will not listen. I don’t know of any sane society where the government takes loans for things like railways and airports. That’s what has been happening in Nigeria for a long time now. Investments in areas like these should be private-sector-driven. Government’s role should be to create an enabling environment for the private sector to go in.
Rational governments work to free resources for health, education and other welfare sectors. But in Nigeria, we are persistently busy collecting loans for ventures better handled by the private sector. Some of the weird things Buhari took foreign loans for included a railway running 40 kilometres into Niger Republic, 40 Parboiled Rice Processing Plants and NTA’s modernisation project.
Oniha also talked about the need for the federal government to gear up its revenue drive. The Buhari government must put in place positive measures to grow revenue. Ministries, Departments and Agencies of the federal government are still stealing trillions of Naira yearly. These agencies can safely fund federal budgets if they meticulously remit revenues.
Unfortunately, the massive corruption, mismanagement and ineptitude in virtually all federal revenue-generating agencies remain unabated under the Buhari government. The likes of Customs, NPA, NNPC, NIMASA, and the Nigeria Upstream Regulatory Commission (NUPRC) are feeding fat on this country.
How can estimated federally-collected revenue in 2023 be under a paltry N20 trillion? Customs alone can generate N10 trillion in 2023 if the holes are blocked. Big revenue agencies can double federally-collected revenue within a year and substantially fund budgets at all levels. This has always been my position.
Despite the huge loans amassed by the Buhari government, this country’s economy is still in shreds and continues to suffer, with no hope in sight. The gloomy news is that under Buhari, and with all the foreign loans, Nigeria surpassed India as the country with the largest number of people living in life-threatening poverty in the world. Regrettably, our President is untroubled and still looking for more foreign loans. This is absurd.
Military Ready to Take Out North-west Terror leaders?
t seems the military is finally ready to take out the terror gangs ravaging the North-west. Early this week, it declared wanted no fewer than 19 leaders of the gangs. For years, I persistently rolled out their names (with locations) and challenged the military to take them out for peace to reign in the region. There was no positive response until this week when the military declared blood suckers like Ado Aliero, Kamfanin Daudawa, Ali Kachalla, Bello Turji, Hallilu Sububu wanted for a long list of killings and kidnapping for ransom. Hundreds of innocent Nigerians are victims of these terrorists.
The military also placed a N5 million bounty on the terrorists and urged the public to provide information that could lead to their arrest. It is good that these criminals have been declared wanted. However, I challenge the military to go beyond this because they know the hideouts of these criminals. The military should go after them with venom and take them out.
For peace to reign in Zamfara, Sokoto and Katsina states, the military must take out Sani Dangote, Bello Turji, Leko, Dogo Nahali, Hallilu Sububu, Nagona, Nasanda, Isiya Garwa, Ali Kachalla aka Ali Kawaje, Abu Radde, Dan-Da, Mamudu Tainange, Sani Gurgu, Umaru Dan, Nagala, Ado Aliero, Monore, Gwaska Dankarami and Baleri.