On-the-rising-debt-profile-of-nigeria-and-the-circle-of-more-borrowing-a-serious-cause-for-concern
September 7, 2020 | News
ON THE RISING DEBT PROFILE OF NIGERIA AND THE CIRCLE OF MORE BORROWING – A SERIOUS CAUSE FOR CONCERN
it would be recalled that some years back, Nigeria was compelled by pressure, from International creditors, particularly the London and Paris club, to ‘voluntarily’ part with almost $12.4bn allegedly owed, so that another $18bn debt could be written off, from the country’s total external debt of about $30bn. Notably, the debt write-off was, primarily, the product of pressure from civil society groups, such as the Jubilee Debt Campaign, Nigeria’s total domestic and foreign debt stocks as at June 30, 2017 stood at about $15.1 billion and N14.1 trillion respectively, the National Bureau of Statistics (NBS) noted late last year. A review of the total foreign debt profile of the Federal and the 36 states governments and the FCT also shows a continuous rise since the coming of the present administration, from $10.718 billion in 2015, to $11.406 billion in 2016 and $15.047 billion in 2017.
However, the public’s concern on increasing debt accumulation is clearly that, there is nothing to show, as positive product of the Nation’s, earlier oppressive debt accretion, which precipitated the controversial 2006 debt reprieve!
Out of the current total figure of $15.047 billion, the Federal Government accounts for $11.106 billion, or about 74 per cent, while the 36 states of the federation and the Federal Capital Territory, FCT, Abuja owe about $3.94 billion, or 26 per cent. The federal and State government shares of the debt stock grew from $7.349 billion and $3.369 billion in 2015, to $7.84 billion and $3.568 billion in 2016, and $3.94 billion and $11.106 billion in 2017 respectively. Regrettably, while countries, like Ghana and Zambia with similar debt overhang got 100% debt relief, Nigeria, with a more formidable array of celebrated negotiators received 60% of the so called “debt forgiveness” Notably, by 2005, the cost of refinancing and servicing $30bn, existing external debt was generally considered as unsustainable. Thus, after ‘debt exit’ in 2006, Nigeria’s debt profile became lighter, with barely $3bn as external debt, while domestic debt, excluding debts owed contractors were just over N1Tn.
Without a doubt, the Nigerian Government, both Federal and State; are killing the country with its binge and unrestrained borrowing and we seriously fear what adverse impact this would have on future generations.
Some months back, Acting President Osinbajo was reported to have sought for the approval of the National Assembly to include the Development Bank of Nigeria (DBN) and Fund for Agricultural Finance in Nigeria (FAFIN-II) into the $1.28 billion 2016-2018 external borrowing plan. Some weeks back before that, the present Government celebrated the $150 million loan approved by the World Bank for the country’s mining sector. The government is also negotiating $1.25 billion in budget support from the World Bank. This is aside the $575 million already approved by the same bank for the rehabilitation of the North-east. And so on does the list of foreign borrowing by the federal government have continued to grow by the day.
With the way things are going, the federal government may end up with close to $10 billion foreign loans by the end of this year. Looking at all of this, the burden on our star-crossed generation and indeed future generation is weighty. Already, a huge part of the revenue that the federal government ought to be using for poverty alleviation and infrastructural development has been going into debt servicing, yet, we are sustaining the binge borrowing. Just recently, the International Monetary Fund estimated that Nigeria spends 66 per cent of its tax revenues on servicing debts.
Agreed that other wealthy and developed countries also borrow. But the difference between them and Nigeria is that they have a well-structured and well-managed system to repay such loans and keep themselves bank-credit worthy. And most importantly, these developed countries are known to judiciously utilize whatever they borrow to improve the lives of its citizenry and also generate enough income via different channels. When one borrows more and above what one can pay at stipulated times, and the person cannot pay back, then it becomes a problem which ultimately leads to bankruptcy. That is where we fear Nigeria is heading to if care is not taken, especially in a situation where these borrowed monies are never accounted for by the Government at various levels.
The saddest part in all of this is the fact that despite these borrowing, the level of poverty, hardship, underdevelopment and backwardness in these States is growing by the day. One then begins to wonder what these political leaders, particularly those at the State level, are doing with these borrowed funds? What has the masses of this country gained from these massive borrowing in terms of infrastructure and poverty alleviation? Honestly, we do not think we have gained anything; not with the hunger, disease, poverty, hardship, unemployment and decay ravaging the country. Just look around you and you will see the level of decay in virtually all sectors of our economy – health, education, water, roads, power, security and the rest of them. What is even more appalling is the way our Governments at all levels celebrate these loans. It often leaves one dejected. They create the impression that it would be a quick fix for all our problems. Unfortunately, it does not often turn out that way.
If the borrowed funds are being used to judiciously improve the nation’s economy and Nigerians standard of living - with a good plan to service the debts without compromising anything, we would not be bothered that much. But in a situation where such unrestrained borrowings have not yielded much in improving the lives of the general masses, but only increasing the pockets of some few in political circles and wasted on servicing consumptions and not investment projects, then it is a serious cause for concern. This is something we all urgently needs to pay more attention to, else, we will continue to ‘eat-away’ our today and future generations.
Zik Gbemre, JP.
it would be recalled that some years back, Nigeria was compelled by pressure, from International creditors, particularly the London and Paris club, to ‘voluntarily’ part with almost $12.4bn allegedly owed, so that another $18bn debt could be written off, from the country’s total external debt of about $30bn. Notably, the debt write-off was, primarily, the product of pressure from civil society groups, such as the Jubilee Debt Campaign, Nigeria’s total domestic and foreign debt stocks as at June 30, 2017 stood at about $15.1 billion and N14.1 trillion respectively, the National Bureau of Statistics (NBS) noted late last year. A review of the total foreign debt profile of the Federal and the 36 states governments and the FCT also shows a continuous rise since the coming of the present administration, from $10.718 billion in 2015, to $11.406 billion in 2016 and $15.047 billion in 2017.
However, the public’s concern on increasing debt accumulation is clearly that, there is nothing to show, as positive product of the Nation’s, earlier oppressive debt accretion, which precipitated the controversial 2006 debt reprieve!
Out of the current total figure of $15.047 billion, the Federal Government accounts for $11.106 billion, or about 74 per cent, while the 36 states of the federation and the Federal Capital Territory, FCT, Abuja owe about $3.94 billion, or 26 per cent. The federal and State government shares of the debt stock grew from $7.349 billion and $3.369 billion in 2015, to $7.84 billion and $3.568 billion in 2016, and $3.94 billion and $11.106 billion in 2017 respectively. Regrettably, while countries, like Ghana and Zambia with similar debt overhang got 100% debt relief, Nigeria, with a more formidable array of celebrated negotiators received 60% of the so called “debt forgiveness” Notably, by 2005, the cost of refinancing and servicing $30bn, existing external debt was generally considered as unsustainable. Thus, after ‘debt exit’ in 2006, Nigeria’s debt profile became lighter, with barely $3bn as external debt, while domestic debt, excluding debts owed contractors were just over N1Tn.
Without a doubt, the Nigerian Government, both Federal and State; are killing the country with its binge and unrestrained borrowing and we seriously fear what adverse impact this would have on future generations.
Some months back, Acting President Osinbajo was reported to have sought for the approval of the National Assembly to include the Development Bank of Nigeria (DBN) and Fund for Agricultural Finance in Nigeria (FAFIN-II) into the $1.28 billion 2016-2018 external borrowing plan. Some weeks back before that, the present Government celebrated the $150 million loan approved by the World Bank for the country’s mining sector. The government is also negotiating $1.25 billion in budget support from the World Bank. This is aside the $575 million already approved by the same bank for the rehabilitation of the North-east. And so on does the list of foreign borrowing by the federal government have continued to grow by the day.
With the way things are going, the federal government may end up with close to $10 billion foreign loans by the end of this year. Looking at all of this, the burden on our star-crossed generation and indeed future generation is weighty. Already, a huge part of the revenue that the federal government ought to be using for poverty alleviation and infrastructural development has been going into debt servicing, yet, we are sustaining the binge borrowing. Just recently, the International Monetary Fund estimated that Nigeria spends 66 per cent of its tax revenues on servicing debts.
Agreed that other wealthy and developed countries also borrow. But the difference between them and Nigeria is that they have a well-structured and well-managed system to repay such loans and keep themselves bank-credit worthy. And most importantly, these developed countries are known to judiciously utilize whatever they borrow to improve the lives of its citizenry and also generate enough income via different channels. When one borrows more and above what one can pay at stipulated times, and the person cannot pay back, then it becomes a problem which ultimately leads to bankruptcy. That is where we fear Nigeria is heading to if care is not taken, especially in a situation where these borrowed monies are never accounted for by the Government at various levels.
The saddest part in all of this is the fact that despite these borrowing, the level of poverty, hardship, underdevelopment and backwardness in these States is growing by the day. One then begins to wonder what these political leaders, particularly those at the State level, are doing with these borrowed funds? What has the masses of this country gained from these massive borrowing in terms of infrastructure and poverty alleviation? Honestly, we do not think we have gained anything; not with the hunger, disease, poverty, hardship, unemployment and decay ravaging the country. Just look around you and you will see the level of decay in virtually all sectors of our economy – health, education, water, roads, power, security and the rest of them. What is even more appalling is the way our Governments at all levels celebrate these loans. It often leaves one dejected. They create the impression that it would be a quick fix for all our problems. Unfortunately, it does not often turn out that way.
If the borrowed funds are being used to judiciously improve the nation’s economy and Nigerians standard of living - with a good plan to service the debts without compromising anything, we would not be bothered that much. But in a situation where such unrestrained borrowings have not yielded much in improving the lives of the general masses, but only increasing the pockets of some few in political circles and wasted on servicing consumptions and not investment projects, then it is a serious cause for concern. This is something we all urgently needs to pay more attention to, else, we will continue to ‘eat-away’ our today and future generations.
Zik Gbemre, JP.