GUEST COLUMNIST BY OKEY ANUEYIAGU
Today, our country’s debt is about ten or more times what it was at the start of this present government. Compared with the size of our economy, this is the largest it has been since independence. To make it worse, this debt profile is projected or expected to grow exponentially to an alarming, but unknown ratio, in the coming years.
Our ballooning debt is the result of the unconscionable choices made by our government from their habitual habit of borrowing money to mostly finance frivolous expenditures, irresponsible spending to support recurrent expenditures for huge salaries of politicians and their unproductive workforce.
This level of debt that we are experiencing today, has in itself, become an economic crisis. The growth of our economy has therefore become imperiled, stunted, and almost comatose. What is assured, is complete catastrophe and doom.
How we got ourselves into this fiscal quagmire is not very difficult to decipher. The constant need to borrow money to fund federal budgets that include salaries, defence, security, education and everything else that government provides for, and the unrealistic expectations for our economic books to balance, created the imperativeness and necessity for government borrowing.
At the end of the civil war, and from years proceeding the war, our coffers were flush with huge revenue from oil wealth and from the export of various products ranging from agriculture to mineral resources. We, at that point, did not know what to do with money. This proposition, of course, did not last for long, for we were very soon to fall into distress and into one of the world’s most indigent and indignant countries.
Paradoxically, we have faced tremendous challenges from many fronts; both institutional and structural, bringing with them, deep-rooted corruption, income inequality, incompetent governments, disjointed policies, deepening poverty and hunger, insecurity and all horrible vices capable of distorting even a well-endowed economy, and hindering prosperity. The results of these contraptions are the colossal losses of economic opportunities that have deprived us of significant growth and progress, leaving us in the throngs of being a beggarly country.
It is clear that what drives a stable economy to a large extent, is the macroeconomic environment which invariably reflects the productive capacity and performance for the competitiveness and profitability of local initiatives and companies that push and provide stability for the economy. But the distortions that we are experiencing in these various sectors, today, portray government’s incapacity to intervene and maintain stability and good economic outlook.
Preceding Buhari’s time, and more prevalent right after his advent in 2015, Nigeria’s macroeconomic environment became essentially unstable, disjointed and portending a dangerous trend hindering economic growth. The dilapidating drivers for these economic outcomes are; foreign exchange drastic volatility, outrageous inflation, fiscal unsustainability and other unfavourable variables that brought high rate of macroeconomic instability.
I have heard a lot of Nigerians, especially our politicians talk about how our country will prosper, but I have not heard any of them tell us how we will grow out of the deep mess of debt that we owe. Fantasize as they may about our prosperous future, the quantum of problems awaiting us and our great-grand-children are unimaginable. It is difficult to share in this fairytale prosperity framework philosophies that will create jobs, reduce poverty and inequality, while ensuring economic and social prosperity for all Nigerians, without capturing the dreadful calculus of our prohibitive huge debt burden. This is very distressing and bewildering to say the least.
Nigeria’s current dispensation finds itself grossly deficient in many of the attributes and qualities that define and power a country’s rise. Our collective strengths in all the facets of our existence should be the building blocks of what should propel our prosperity. But to succeed, we must reinforce and support these collective strengths and attributes. Instead, our aggregious penchant for little ambition, shortsightedness, lack of diversity, and lack of willingness to learn and adapt to proper ways of doing things, have imperiled and slowed, or even regressed our economic development and growth.
The first essential indicator or characteristic of the foundation of a country’s strength lay in its economic power and wellbeing. The causal links between these, and the success a country records across board, suggest that they play very prominent role in determining the fate of all nations, Nigeria inclusive. When the dynamism and vitality of our oil boom era evaporated, the fearful threat to our existence faced a strikingly dreadful peril.
I find it rather difficult to begin to apportion and assign responsibility, or blame to individuals or regimes for our levels of debt, but by their disgustingly crude action, the debt has become a stinking filth that has been the bane of all our past and present leadership. Even as some economists agree that by borrowing during economic downturn, the borrowing entity helps to revive the economy by protecting its citizens and businesses. However, the case of our debt burden is disproportionately inconsistent with reality. In order words, we cannot justify the huge debt we have accumulated with any significant commensurate development and economic growth. Where did all the money go? Some think that it disappeared into the leaky pockets of our politicians and their lackeys.
Others swear, that they can trace these borrowed monies to the Swiss Bank and Dubai Bank accounts of our citizens and their thieving partners.
Just imagine: our current debt stands at US$101 billion, about N44 trillion. According to the data available from the Debt Management Office, the debt categories are as follows: Total External Debt = US$39,661.72 million, Total Domestic Debt = US$62,251.71 million, Federal Government of Nigeria Debt only = N49,846.02 million, States and FCT = US$12,402.69 million. All these total to over 100 billion US Dollars. By the First Quarter of 2022, our debt stock stood at a staggering $40 billion, up 288% from $10.3 billion at the beginning of Buhari’s “change” government. Take a look at the profile of our domestic debt that has risen above 160% from N8.4 trillion to well over N22 trillion, and see how the country’s debt-to-GDP ratio has been pushed beyond a 40% threshold.
The agony of our predicament is that we now spend as much as 90% of our revenue on debt servicing. We are at risk of economic extinction if you consider the position of other economies. For instance, South Africa which has about 2.5 x Nigeria’s debt stock and over 2 x the debt-to-GDP ratio, is a good case in point. Like an economist wrote; “Nigeria is staring down the barrel of financial bankruptcy.”
The challenges confronting Nigeria are grievous and very real. The threats posed by the debt conundrum should never be underrated or exaggerated, but must be viewed as absolute antithetical to Nigerian interest, values, goals, and future. This phenomenon has become counterproductive, yielding devastating domestic repression and orthodoxy. On a melancholic meditation, my firm grip on the causes of our present and future anticipated stagnation and decline can mostly be pointed to the consequences of our protracted and senseless borrowing and our ever ballooning debt.
Today, the most pressing question is; what is the fate of our economy in the face of the huge and mounting debt? The answer can be found in the many upheavals the country is experiencing. Nigeria is presently in the midst of the most consequential economic decline in its entire history. There is a growing consensus that the present level of economic decay is beyond destructive demagoguery with definite and clear danger, uncertainty and ambiguity.
The burden of our debt can be linked to the rapidly growing inconsistencies in our economic policy plans and the inherent failure of our planners, the institutions and its apparatus to lift us out of abject poverty and misery. The consistent advocacy for infrastructural investment financed by borrowed funds, is challenged by the ever constant failure in matching the rhetorics with the volume of funds borrowed. The borrowed funds have failed to address the myriad of problems confronting and hindering the economic growth of Nigeria in the areas of power supply, inadequate road network, air, rail and waterways provisions, insufficient domestic food production and processes, fuel and oil industry supplies, and other infrastructural areas. To be clear, these inadequacies have continued to fester unabatedly, holding our country in a precarious stranglehold.
For over 50 years, Nigeria has failed, or has been unable to solve these problems as we have exponentially become desperately poorer, weaker, and despondent. The variables that made us economically strong in the early 1960s have all but disappeared. Recall that we used to be number 3 in the entire world in the production and distribution of cocoa, rubber, palm oil, and were in the group of the world’s largest producers of textile, sugar cane, sorghum, cotton, magnesium, columbine and tin. Until crude oil became a prominent feature in our economy, Nigeria had a relatively strong, viable and potentially progressive economy. Today, we have become intensely poorer and may have no clue of how to creatively scamper out of this quagmire, except to borrow, borrow and borrow, jeopardizing our generations to come.
We must all worry about the present position of our country’s debt profile. We must be disturbed, knowing that our government is poised to go a-borrowing again at a time it is paying out of its nose to service the existing debts, even as it is glaringly evident that our main source of income which is oil is experiencing unpredictable and very sluggish movements.
Uncertain times call for hope and for redemptive minds, but the notion of a quick repair of this damage to our country now and in the future, is a chimerical projection. There is no iteration evident in our past and present behavior in history that allows us to dream of a better tomorrow, especially in the area of our indebtedness. My passivism is cemented in my knowledge of how pervasive the repercussions for indebted countries have become and attracting dire consequences. How do we expect to bail out of these debts without attracting stiff conditions and penalties that will force major austerity measures which will plunge an already reeling country into further turmoil? I bet that with the barrels of the guns of these borrowing entities staring us in our eyes, we will begin to lose our sovereignty and our economic order and independence. Without any doubt, the days are coming when we will be unable to repay our debts. The debtors will have no choice but to find ways to recover their funds either by taking control of our national treasuries, and compelling us to open our territories for exploitations.
Perhaps one of the most fundamental setbacks of our debt burden issue, is the positions taken by The International Rating Agencies. Moody’s and Fitch downgraded their rating for Nigeria, targeting the cutting of our long-term foreign currency bond, by revising Nigeria’s economic outlook downwards, from stable to negative. The reasons announced for these downgrades are pointed to the burden placed on the economy by the ever rising budget deficit, the ballooning and mounting debt profile and other supply-side issues and challenges. The general expectation is that Nigeria’s fiscal and debt position will continue to decline and deteriorate, and that its capacity to respond remains constrained by sustained and long-standing institutional and structural weaknesses and defaults.
The forecast for our economic future is bleak and precarious. Our external position will be gravely weighed down by our government’s constrained access to external funding, depressed and the uncertainties surrounding oil production, capital outflows, and other extraneous circumstances. Most crucial, is our government’s inability to demonstrate a clear vision of delivering on fiscal reforms.
Another depressing drawback, is the negative governance profile score (G-5 issuer profile), that shows very weak control of corruption and the rule of law, and an alarming failure in the management of internal resources and public funds. Ultimately, we are on our way to a fiscal deterioration, the type never seen or recorded in our history.
My perception is that these mountains of loans and the resultant heavy debts will further presage and worsen the conditions of our children yet unborn, and will imperil their future with problems and challenges. We have bequeathed onto them, a destabilizing and consequential tomorrow whose outcome is predictably frightening.
•Dr. Okey Anueyiagu, A Political Economists Writes from Ikoyi, Lagos