The precarious state of Nigeria’s (and indeed Africa’s) public debt was re-echoed recently by eminent economic experts across the continent. This cry coming from renowned experts appears to be what the country needs at this time of economic emergency to hopefully, convince the policy makers in Abuja to take a different path in the management of the Nigerian economy.
At the African Development Bank Group 2021 Annual Meetings, the Director-General of the World Trade Organisation (WTO) and ex-Minister of Finance, Dr. Ngozi Okonjo-Iweala, the President of the African Development Bank (AfDB), Dr. Akinwunmi Adesina and the Governor of the Central Bank of Egypt (CBE), Tarek Amer among other regional economic stakeholders, expressed concern about rising national debts in Africa, warning that most African countries face a high risk of falling into a debt trap. The concerns by these experts indicate that debt service has become a major burden on many African economies. This is what this newspaper has been emphasising in the past few years, particularly since the inception of the Buhari administration in 2015. It is not surprising that credible stakeholders on the continent have lent their voices in support of this position.
Data emanating from the National Bureau of Statistics (NBS), the Debt Management Office (DMO) and the International Monetary Fund (IMF) among others, indicate that total public debt in Nigeria grew from about N12.1trillion in May 2015, to N17.36 trillion in 2016, N21.72 trillion in 2017, N24.38 trillion in 2018, N27.4 trillion in 2019 and presently over N33 trillion in 2021. The figures had skyrocketed to frightening levels in 2020 with the active connivance of the Ninth National Assembly under the Chairmanship of Senator Ahmad Lawan.
The figure is still growing particularly with the approval of two fresh foreign loans of $1.5 billion and €995 million earlier in 2021 and in June 2021, the Senate again approved another request from President Muhammadu Buhari for ongoing external loans to the tune of $8.325 billion and €490 million under the 2018-2020 External Borrowing (Rolling) Plan. By these, every Nigerian currently owes about N157,900 in terms of debt per capita. In 2020 particularly, total revenue earned stood at N3.93 trillion while a whopping N3.26 trillion or 83 per cent was spent on debt service. In the first quarter of 2020, debt service to revenue ratio was as high as 99 per cent with N943.12 billion spent as debt service out of retained revenue of N950.56 billion. No doubt, this trend is scary.
The alarm raised by Okonjo-Iweala that Nigeria could still fall into another debt trap is worrisome. She asserted that with a higher debt carriage capacity comes a higher risk of distress and that ignoring debt sustainability would be a clear case of exposing the economies to systemic risks particularly when many of the African economies are on a downward economic path. On his own part, Adesina lamented that only one of 38 African countries is free from sustainability challenges, according to sustainability reports, with the risks ranging from moderate to high risks. His call for full transparency on public debt issues, macroeconomic reforms convergence among African countries, fight against corruption and deepening of domestic resource mobilisation would need to be heeded in addressing the debt problem on the continent. These are very important and well informed advice that managers of the Nigerian economy need to give serious attention to.
Incidentally, Nigeria’s Minister of Finance, Budgeting and National Planning, Mrs Zainab Ahmed, at a webinar organised by the Nigerian Economic Summit Group, asserted that Nigeria cannot stop borrowing. This is worrisome at this time when many experts and other stakeholders within and outside the country have cautioned on the dangers of unbridled borrowing. It is a pointer that the Buhari administration appears to have shown gross insensitivity to this very disturbing issue. It is surprising that the government is not even cutting the cost of government in the spirit of the trying times. Instead it has resorted to more and more borrowings as the way out of its challenges. The Buhari government needs to be reminded that it is setting a time bomb for future administrations and thus making the country difficult to govern in future. Even if the government is hoping for a debt cancellation, as Buhari has recently canvassed for African countries, it should take note of expert opinions that indicate that debt relief in itself does not lead to economic growth. The poor argument put forward by government and other proponents of more borrowing is that the country’s Debt-GDP ratio is still healthy and below 40 per cent. They, however, lose sight of the fact that GDP does not repay debt; revenue does. Currently, the debt service to revenue ratio is in the region of 80 per cent, implying that for every N100 earned as revenue by the country, N80 will be used to service existing debts while a paltry N20 will be left to keep the economy running.
Finally, alongside the way forward proffered by these two eminent Nigerians, the ray of hope raised by Tarek Amer, the governor of the bank of Egypt on the way out of this recurring mess needs to be heeded. This is in relation to the recent decision of the IMF to issue $650 billion Special Drawing Rights (SDRs) with $100 billion of these provided to support Africa as endorsed by African heads of state and global leaders at the Summit on Financing of African Economies, called by President Emmanuel Macron of France. Nigeria should pursue this option in addition to the wise counsel given by her own Okonjo-Iweala and Adesina. The Buhari administration should avoid taking decisions on public borrowing that would put the present and future generation in serious jeopardy. The expert advice should not be treated with disdain.