N77trn debt: We’re back to dark days, Nigerians cry out

 

There is growing fear that Nigeria may just be back to the dark days before the country got debt forgiveness in 2003 with its public debt projected to rise to N77 trillion before the President Muhammadu Buhari’s administration leaves office on May 29, BENJAMIN UMUTEME reports.

At the Public Presentation and Breakdown of the highlights of the 2023 Appropriation Act, the Director General, Debt Management Office (DMO), Patience Oniha, disclosed that the public debt, which presently stands at N44.06 trillion as at September, 2022, would hit over N77 trillion by May 29, 2023.

Responding to questions on Nigeria’s debt, Oniha said the move by the federal government to securitise the loans (Ways&Means) from the Central Bank of Nigeria (CBN) would drive up the debt.

“Secondly, there are a lot of discussions on the Ways and Means. In addition to the significant cost saving in loan service we would get by securitising it, there is an element of transparency in the sense that it is now reflected in the public debt stock.

“Once it is passed by the National Assembly, it means we will be seeing that figure included in the public debt. You will see a significant increase in public debt to N77 trillion.

“The other area of the debt stock we are trying to highlight is to say the debt stock is also growing from the issuance of promissory notes which are not true borrowing as such by the government,” the DMO DG said.

Explaining further, the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, emphasized that when the Ways and Means get legislative backing, it would help reduce the current interest on the instrument to about 9 per cent as well as stretch repayment period to about 40 years.

She said: “Currently, the Ways and Means is running interest rates, which today is averaging 18.5 per cent. That’s a very, very harvest so if this is not affordable, the interest rates accruing again and adding to the Ways and Means anything from N1.8 trillion to N2.2 trillion. So, that will be the consequence. I’m sure they will understand.

“So, once that approval is given it will benefit from a lower interest cost of 9per cent, and will benefit from a stretched initiated plan of 40 years with a three year moratorium which will provide very significant relief to the federal government.”

Poor budget achievement

Speaking with Blueprint Weekend, a financial analyst Gabriel Idakolo said the N77 trillion debts for the incoming administration would affect capital projects and at the same time lead to a higher spend on debt service.

According to him, it would strain capital projects implementation in 2023 and could lead to poor budget achievement.

He said: “The implications for the incoming government are far reaching because it means higher costs will be incurred in debt servicing and major infrastructural projects will be affected.

“The economy is presently in a dire strait and with additional borrowings to finance the budget the situation could get worse in an election year where politicians are concerned majorly about elective offices and worry less about the economy.

“The government should reposition its fiscal policies to target key growth areas like the power sector implementation plan, Petroleum Industry Act to actually jumpstart the economy.

“The government needs to dissipate more energy in increasing commerce by making sure that the energy and petroleum sectors are given adequate attention in 2023 to increase government revenue and improve investment interest by both local and foreign investors.

“The country does not presently have the carrying capacity to service debts of up to N77 trillion unless the government creates more avenues for revenue growth.”

Drawback for next govt

For political economist Olamilekan Adefolarin, the huge debt would be a drawback to the incoming administration’s dream of funding the country’s development needs.

He told this reporter that it would have grave implications for the incoming administration as both macroeconomics and microeconomics would be hit.

According to him, the majority of government policies would suffer from paucity of funds thereby making them less effective.

“Government’s revenue would only serve the purpose of paying old debt, hence leading to more borrowing and loans.

“It could also lead to the government not being able to meet up with payment of workers salary as well as other welfare for the workers.

“Lastly, this could also lead to mistrust and misgivings between the people and the incoming government especially if the incoming do not have a sizable number of political appointees.”

I’ll worsen debt situation

On his part, a Professor of Political Economy, Pat Utomi, said the country would be using all of its revenue that would be generated this year to service debt.

According to him, the projected figures of N9 trillion revenue and expenditure of N21 trillion, does not make sense.

He said, “They project revenue of N9 trillion and expenditure of N21 trillion. You are already in an unsustainable debt situation. This doesn’t make any sense to anyone who understands economics.

“If it were a situation where people are rushing in to invest in Nigeria, you would say revenues from taxes that flow in would accelerate production. There is an optimal rate of trying to collect taxes when people don’t invest.

“Nigeria already suffers from a problem, a situation described by Forbes Magazine in 2019 as Africa’s money losing machine. Typically, nobody wants to invest and money has been leaving Nigeria.”

Revenue’ll be consumed by debt servicing

In a virtual interview on TVC breakfast show monitored by Blueprint Weekend, Economic Analyst, Muda Yusuf, expressed worry about the public debt describing the figure as frightening.

While admitting that it was difficult to run a capitalist economy by taking loans, the former Lagos Chamber of Commerce and Industry Director General, said it must be within the ambit of the law.

According to him, with the Ways and Means and other borrowings, Nigeria’s public debt may hit N80 trillion by December.

“The totality of revenue would be consumed by debt servicing. It has complications for project execution. It has a crowding out effect for the private sector,” he said.

Contravenes CBN Act, others

Similarly, while speaking on Arise TV the Chief Executive Officer CFG Advisory, Adetilewa Adebajo, said the borrowings have not only exceeded limits, it had also contravened the Central Bank of Nigeria (CBN) Act and Fiscal Responsibility Act that should regulate borrowings.

“There is no law that says the CBN can transfer its debts to the DMO. If there is any requirement on the National Assembly on domestic debts, the DMO is already empowered to raise money on domestic debts.

“The DMO is not mandated to go to the National Assembly before they borrow abroad, but the Ways and Means give them the right. But it is not supposed to exceed N1 trillion. It is at N22 trillion, which indicates that they have exceeded the limit. This is where the illegality comes in,” he said.

Confronting the situation

To escape the debt trap, Yusuf said the government must prune down its expenditure; just as he suggested the removal of subsidies by the incoming administration as one of the ways of cutting expenditure.

“The government must stimulate investments in the oil and gas sector through reforms as well as cut down on the cost of governance.

“Eighty per cent is going to recurrent expenditure while 20 per cent is going to infrastructure. If an economy is not productive, it cannot generate revenue. Productivity is about addressing revenue,” he stated.

In the same vein, Adefolarin said the incoming government would need to cut down on the size of political appointees and initiate stringent measures against wastage and inefficient programmes.

“Focus on government priorities that would ensure profitable government ventures. Be proactive in the fight against corruption and poor accountability of public funds,” he maintained.