Opinion: Who will pay these huge debts?
The recent warning signal raised over Nigeria’s ever escalating debt profile by experts including Prof. Pat Utomi and Mr. Bismarck Rewane is not only timely but a call to action. Similarly worried over the increasing debt burden at both the state and federal levels, I had written an opinion, titled, “Nigeria’s debilitating debt profile”, published on Wednesday, January 2, 2013. But the situation has only worsened.
For instance, as of September 30, 2012, the country’s external debt jumped to $6.2bn, with a domestic debt profile of N6.3tn. Yet, back then, the state governors were still asking for an additional $7bn external loan! Fast forward to 2017. As of March this year, the nation’s total debt had risen by N7.1tn to a mind-boggling N19.16 tn. And wait for this: Acting President Yemi Osinbajo has through a letter to the National Assembly requested that $1.94bn loan be granted for 10 states. The explanation given is that the humongous sum is meant for projects from the 2016 to 2018 External Borrowing (Rolling) Plan of the Federal Government for the concerned states.
One’s current concern, however, is who will pay off these huge debts? Will the burden being left by the reckless and frivolous political class not be too weighty for the lean shoulders of our jobless children? Will they not be turned to slaves and beggars in their own country by the creditor nations, just because they want to pay off the debts? But that is not all.
There are still some salient questions all begging for answers. Have we not been making money from crude oil sales over the past two years, recession or not? What about the huge revenues from other sources such as the multiple company taxes including VAT, inflow from the ports and that from the customs service?
Where have all these gone in the face of decrepit and dilapidated infrastructure, annual budget deficits, fragile health care system and a drastic dip in the standard of education across the country? With 23 out of 36 states unable to pay salaries to civil servants as and when due, in spite of the so-called bailouts, one cannot but remember the question Prof. Ayodele Awojobi (of the blessed memory) had asked the Alhaji Shehu Shagari-led administration: “Where has our oil money gone?” Your guess is as good as mine.
Besides, many of the commercial banks are not lending to the real sector to boost manufacturing. Sundry consumables including textile materials and electronic equipment, especially from China and other South-East Asian countries are either being imported daily at an astonishing rate, or smugglers are having a field day. All these have no doubt led to an unprecedented unemployment level and the upsurge in the wave of crimes including armed robbery, kidnapping, arson and hideous ritual murders!
Surprisingly, as of 2013, the former Minister of Finance, Dr. Ngozi Okonjo-Iweala, the very person who assisted the country out of the huge debt burden to the Paris Club back in 2005, was justifying these new debts. Back then, she claimed that such loans were needed to finance infrastructural development, especially in the critical area of power sector. On the surface of Okonjo-Iweala’s argument then was that Nigeria’s macro-economic stability, a Sovereign Wealth Fund of $ 1bn placed in the international market for lending, stable economic growth of an average of seven per cent and attraction for Foreign Direct Investment all pointed to the best time for borrowing. She even added that the loans had been negotiated with multilateral institutions on highly concessionary terms. She sounded convincing then. But some four years later, similar reasons such as the need for stable power supply and infrastructural development are being provided as the basis for the huge loans.
But again, the equation does not seem to add up here. With the much-acclaimed road map on the power sector, the reforms were supposed to be anchored on Public Private Partnership. The unbundling of the electric energy generation/supply and distribution meant that government should spend less while the partners from the private sector should inject more funds. Why should we then be bent on borrowing huge sums of money from external creditors at high interest rates at a time the naira-dollar exchange rate is astronomical? Indeed, Nigerians are hard put to support the reasons advanced by our political and economic pilots for the loans because of the grave implications for the average citizen.
Indeed, not even the then Central Bank of Nigeria Governor, Lamido Sanusi, pitched his tent with Okonjo-Iweala. He gave his words of caution. He stated, with emphasis, that if we continued to borrow the way and manner both the federal and state governments were doing, the huge debt profile would place “undue burden on posterity”. He explained that, “We are borrowing more money today at a higher interest rate while leaving the heavy burden for our children and grandchildren.” His position was echoed by the David Mark-led Senate that warned the state governors against external debts that kept piling by the day.
It will be recalled that even former President Goodluck Jonathan lamented the scary situation of rising domestic debts while presenting the 2012 budget proposal to the National Assembly. So serious was the issue that in one year of Jonathan’s administration, the debt profile rose by N1.21tn! The Federal Government budget earmarked N560bn for debt servicing.
Let us recall that late in 2016, Sanusi warned that a situation that had the Federal Government spending 60 per cent of its revenue inflow on repaying foreign debt was not healthy for our economy. Normally, debts should not go beyond 30 per cent debt to the GDP. But as of 2013, the debt- to- GDP ratio stood at 20 per cent. As I put it then, “Enlightened Nigerians must be worried about a government that cannot provide its basis needs, yet, budgets trillions of our common wealth for projects that are not completed as and when due, while such funds are not properly monitored.” That was the warning yours truly gave back in 2013. Is it any different now?
Accountability, probity and transparency in government’s business transactions have become clichés that Nigerians are tired of being regaled with. This raises some similar fundamental questions: Who will pay these huge loans? And at what interest rates? punch