Discourse over the state of the Nigerian economy has been one of mixed colourations. The ready reflections of the songs to revamp the economy have been with resonating effects in recent times. However, the recognition of red signals which readily pose worries with pessimistic tendencies have continued to regenerate themselves with strings of strains compounding to further dampen hope. The debt profile of the Country remains one of the forces posing daunting reflections to the prospect of reviving the economy in any close projection.
The ready thought of incurring debts by borrowings to sponsor projects whose prospects to realistically cater for repayment is not solidly concrete, has been a source of worries. Some critical observers have begun to peruse the dangers that lie ahead in the tendencies of borrowing to sponsor overhead as against capital projects. At another end, flags have been raised on the blows that corruption have dealt on borrowings, claimed to be channeled towards capital projects. The non evident system of returns by which projects would generate repayment funds for acquired loans have remained a subject of critical concern. Several of these projects are known to have failed while the debts keep piling to create strings of burdens on the Country.
Just recently, the National Bureau of Statistics (NBS) had revealed that the domestic debt of Nigeria rose to N20.64trillion as of March 31, 2021 from N20.21trillion as at December 31, 2020, with the cost of servicing the Country’s debt from January to March this year standing at N993.5bilion. The breakdown of the report showed that a total of N612,712,626,144.40 was spent on domestic debt service while $1,003,409,940 (N380.79bn) was spent on external debt service payments.
It would be recalled that the PricewaterhouseCoopers (PwC) Nigeria, had said in a recent report noted that the increasing cost of servicing debt has continued to weigh on the Federal Government’s revenue profile. The report had read: “Actual debt servicing cost in 2020 stood at N3.27trn and represented about 10 per cent over the budgeted amount of N2.95trn. This puts the debt-to-revenue ratio at approximately 83 per cent, nearly double the 46 per cent that was budgeted. This implies that about N83 out of every N100 the Federal Government earned was used to settle interest payments for outstanding domestic and foreign debts within the reference period. In 2021, the FG plans to spend N3.32trn to service its outstanding debt. This is slightly higher than the N2.95tn budgeted in 2020.” According to data obtained from the Debt Management Office, the Country’s current debt profile hit N33.10 trillion as of the end of the first quarter of 2021. The figure represents an increase of N191billion compared to the N32.91trillion recorded in December 2020.
The notations on the burden posed by the heaping of debts on the Government remains troubling. It is apparent that the borrowings are actually not evidently serving their purposes. The level of efficiency of the usage and output of the fund borrowed and their return productivity, appears to be bearing huge disparities creating deficits of returns. This has no doubt brought the Country to its knees, burdened by debt.
Taking critical position on the dangers that lie in borrowing to run overhead, the Chairman, Senate Committee on Army, Senator Ali Ndume, had on Sunday in a statement he signed on the commemoration of Democracy Day, advised the President Muhammadu Buhari-led administration against spending foreign loans sourced from international lending agencies on recurrent expenditure; such as salaries and overhead. The former senate leader, who is representing Borno South Senatorial District in the National Assembly, had said that there was absolutely nothing wrong with a country taking foreign loans but that such should be spent to boost agriculture and the revival of moribund industries, mentioning that “it is what the government does with the money that is important.”
The statement had partly read, “Concerning the issue of foreign loan borrowings, the problem is not about borrowing because the idea is not bad. Even developed nations also do the same thing. It is what the government does with the money that is important. The concentration on infrastructural development by the Buhari administration, especially in the area of railway and road infrastructure is commendable. The Federal Government should look at the possibility of borrowing for agricultural development so that our people will move from subsistence farming to a mechanised one. If that is achieved, it will generate employment and guarantee food security. Also, there would be no need for Nigeria to spend foreign exchange on food importation. We can produce all types of food in Nigeria only if the farmers are well funded.
“The borrowings should be spent on purchase of farm implements and other farming machinery and make it available to farmers. The external loans should also be used to fund moribund industries especially textile and spare part manufacturing among others. It is only through that the government can guarantee borrowings because the manufacturing industries will come up again through the Manufacturers Association of Nigeria. The loans should be borrowed from the international lending agencies whose terms are very good in order to develop our road infrastructure and mount toll plazas in order to generate revenue to pay back the loans. Borrowings should not be made to defray recurrent expenditure like payment of salaries and overhead costs. Funding for such purposes should be sourced locally from taxes and other internally generated revenues.”
The subject of the absence of structures to realistically address returns for borrowed funds remains a mind-boggling discourse. Where such provisions are stated, it is apparent they are rather more of paperwork reduced to mere documentation than actual product of architectures directed to produce the desired effects to achieve the set goals. The administrative failure has led from time to time to a heap of debts which is becoming burdensome on the Government and troublesome to the economy.
The wrong disposition of resorting to servicing debts through proceeds from oil is hitting hard on the Country with the precarious fall in global oil prices. It is important to state that such disposition is practically a non-justifiable tendency to rational economic framework. It is best imperative for the Government to come to the reality of creating structures for returns through which every project to be funded by loans would cater without failure for the repayment provisions according to schedule. The heaping of debts with non-prospective patterns of working structures of repayment is a deficient posture of the administrative formations of the Government.
It is paramount for the Federal Government and all Federating components to come to the reality of creating standard structures to responsively cater for the repayment of any future loan proposal before taking moves towards acquiring same. The non-prudent and irrational tendencies of borrowing funds without concern on the futuristic dangers that deficits in repayment would portend, is faulty. It therefore behooves all custodians of political offices from executive heads to the legislative bodies at all levels of Government in the Federation to move up to the guiding orientations of the patterns of administrative efficiency to safeguarding the economy from future entanglements.