BY EMEKA EJERE
Nigeria is broke! This is the inconvenient truth most Nigerians would not like to hear but it is the dark prospect staring the nation in the face. Last week, Director General of the Budget Office, BO, Mr. Ben Akabueze, hinted that about 468 government agencies may not be able to pay November salary. This is in addition to the rising debt profile.
With unfolding events signaling no end in sight to debt service at N3.2 trillion in the 2020 budget consuming a substantial part of Nigeria’s public revenue, which stands at N9 trillion in 2020, stakeholders are agitated that the nation may be headed for a break future if the federal government fails to be more decisive in its debt management policies.
Only last week, the minister of Finance, Budget and National Planning, Zainab Ahmed, while defending the 2021 budget proposals at the sitting of the Senate Committee on Local and Foreign Loans, revealed that Nigeria’s public debt would hit N38trillion by December 2021.
In her presentation, Ahmed said the total public debt stock comprising the external and home debts of the federal and state governments as well as the Federal Capital Territory stood at N31.01 trillion ($85.90 billion) as of June 30, 2020.
“It is projected, based on existing approval, to rise to N32.51tn by December 31, 2020 and N38.68tn by December 31, 2021,” she disclosed.
She further explained that the proposed N4.28 trillion borrowing was broken down equally between domestic borrowing of N2.14 trillion and external borrowing of N2.14 trillion.
Her comments aggravated growing concerns over Nigeria’s debt stock. This is even as the nation plans to fund the 2021 budget deficit with N4.28 trillion new borrowings which represents about one-third of the proposed budget.
In the 2021 budget presented to the National Assembly in October, President Muhammadu Buhari proposed a N13.08 trillion expenditure plan for the next fiscal year. He also announced that total federally distributable revenue is estimated at N8.433 trillion in 2021 while the total revenue available to fund the 2021 Federal Budget is estimated at N7.886 trillion.
The 2021 Appropriation Bill has a provision of N3.12 trillion for debt service. Domestic debt service has a provision of N2.18 billion while external debt service has a provision of N940.89 billion.
Cruising to debt trap
Business Hallmark’s checks reveal that Nigeria’s debt stock has risen by over 158 per cent in the last five years. A look at the external debt profile of the nation since June 2015 when former President Goodluck Jonathan vacated the seat for his successor shows that Buhari inherited a national foreign debt of N10.3 trillion in June 2015 from the immediate past administration.
By June 30, 2016, the nation’s loan had risen to N11.3 trillion, representing a 9.2 per cent increase in the national debt of the country. By June 2017, Nigeria’s foreign debt grew from N11.3 trillion to N15.0 trillion, representing a total of 33.6 per cent increase compared to the figures in 2016.
Fast forward to 2018, from the N15.0 trillion dollars, the external debt skyrocketed to N22.1 trillion dollars, making up to 46.8 per cent increase in foreign debt. As at the end of the second quarter of 2019, Nigeria’s external debt increased to N27.2 trillion dollars, amounting to 23.0 per cent increase in the year.
What it means is that between June 30, 2015, and June 30, 2019, spanning the four- year first term of Buhari, the nation’s foreign debt cumulated by 163.2 percent.
But the president was not deterred from asking for more foreign loans, as evident in a fresh $30 billion loan request which he sent to the Lower and Upper Chambers of the National Assembly for approval. The position of his economic advisers is the Nigeria still has a positive debt to GDP ratio, which is about 18 percent with upward limit of about 48 percent; while the economy has already exceeded the revenue to GDP threshold.
Little wonder former chairman, Senate Committee on Local and Foreign Debts, Shehu Sani, in reaction to the second bid by Buhari to obtain the loan said, the 8th Assembly “turned down the FG loan request for $30 billion to save Nigeria from sinking into the dark gully of a perpetual debt trap”. He added that it was an action taken to stop the country from being recolonised by creditor banks.
Saving the future
Commenting on the federal government’s plan to raise Nigeria’s debt profile by N6.17tn in 2021, the People’s Democratic Party (PDP) berated Mr. Buhari for what it described as insatiable appetite for loans and advised the National Assembly not to be the President’s rubber stamp.
The opposition party’s spokesman, Kola Ologbodiyan, in an interview said, “It (the plan to get more loans) is the height of insensitivity. The Buhari regime’s insatiable appetite for loans is unequalled in our national history.
“Nigerians have yet to recover from the news of the mortgaging of our sovereignty to the Chinese in exchange for loans, now we are looking for loans from Brazil.
“At the rate this regime is going, we may soon be borrowing money from Togo. What has the Buhari regime done with all the money it has borrowed since 2015? The other day, they told Nigerians they want to borrow money to construct railway lines to Niger Republic.
“We expect the National Assembly to demand that the regime accounts for all the loans it has collected in the name of this country since 2015 before entertaining any such request.
“We also expect the National Assembly leadership to look beyond partisan politics and consider the future of this country in taking decisions. Acting as a rubber stamp to the executive in such matters, is certainly not in Nigeria’s best interest.”
But the acting director-general of Manufacturers Association of Nigeria (MAN), Ambrose Oruche, is not against borrowing, if the funds would be channeled effectively to solve pressing issues.
Oruche, who added that the application of the funds should be able to generate revenue that could be used to repay the loans, advised the National Assembly to carry out the necessary investigations before approving any loan.
“The National Assembly should do due diligence before approval. Every loan application should be properly evaluated and reviewed”.
“I am not against borrowing but effective utilisation of the money is necessary to be able to repay the loan. If we borrow, how are we to ensure that the money is properly utilised? From which source do we intend to repay the loan?” he asked.
According to him, Nigeria spends so much money to service loans the government borrows and also on repayment, which is not good for a developing economy.
Also, the deputy director of the Socio-Economic Rights and Accountability Project, Kolawole Oludare, said it would be improper for the National Assembly to approve fresh loans “until the President gives account of how his government has spent billions of dollars in loans that have been obtained since assuming office in 2015.”
He said, “It is absolutely wrong for the leadership of the National Assembly to suspend the probe into the process and sanctity of all the loans that have been obtained by this government
“SERAP will hold the leadership of the National Assembly to account if it goes ahead to approve the $1.2bn loan from Brazil. The National Assembly ought to diligently exercise its constitutional oversight roles in all requests for approval for any loans.
“The National Assembly should ask President Buhari to publish details of spending of all loans obtained since May 2015, including details of the interest accruing from the loans, and details of the projects on which the loans have been spent.”
In June, the Centre for Democracy and Development (CDD), cautioned President Buhari against plunging the nation into further debt, saying the continuous accumulation of debt appears unsustainable. It said servicing of debts was already accounting for more than 60 percent of government revenue.
The advice was contained in a report released by the organization in Abuja titled “Fluctuating Fortunes: A 5-year Economy Assessment under the Buhari Administration”.
According to the report, the nation’s debt burden is expected to further increase in 2020, especially if government fails to be more decisive in its debt management policies.
The report argued that the inability of the federal government to implement robust policies to salvage the fiscal situation and the six months delay in deciding the cabinet paved way for an economic crisis in 2016.
It noted that the high rate of unemployment and increased poverty partly triggered the security challenges in the country, which was a key campaign promise of the President.
CDD said: “The assessment informs that in the period under review, unemployment rate was high among youths, as about 5.3 million youths within the age bracket of 15-24 could not get a job in 2015.
“In addition, the report refers to how lower government revenue resulting from the “twin shocks” (COVID-19 and oil) will further saddle Nigeria with a huge debt burden. The point is made with clarity about how the federal government borrowing has grown by more than 100 percent since 2015.
“Although federal government’s current debt stock of about N28 trillion is less than 20 percent of GDP, the continuous accumulation of debt appears unsustainable as servicing of the debts is already accounting for more than 60 percent of government revenue.”
But the All Progressives Congress said the PDP was worried that the ruling party had within just five years succeeded in areas where successive PDP administrations failed in 16 years.
Its deputy national publicity secretary, Yekini Nabena, said, “The PDP is simply confused that we are succeeding where it failed. The PDP governments collected all sorts of loans with nothing to show.
“But since 2015, all of the loans this government has collected there is evidence for all to see. Is it the loans for rail lines? What about our ongoing road projects across all the six-geopolitical zones?”