Huge public debt: Nigeria needs debt forgiveness
Discourse over the narratives of debt servicing by the Government of Nigeria has become coloured with interlocking subjects. The concerns over the discourse have much centered on the entanglements of the dispensation of debt servicing on revenue. The strains of servicing debts have well been observed to be posing threats against capital projects, the demands of which, are much alarming for the recovery of the Country’s economy. While special capital interventions to salvage the economy from its prevailing wobbling precipice is non negotiable, it is evident that the burdens of debt servicing have posed limitations of entanglements foreclosing such possibilities. It has dawned on the Country that the burdens of debt have left strains from clogs which are irreconcilable with the demands of addressing the negativities of the wobbling economy.
It was recently disclosed that in five years the Country has spent no less than $1.79bn on servicing debts owed to the World Bank and the Exim Bank of China. As of March 31, 2021, records showed that Nigeria owed the World Bank a total of $11.51bn and the Exim Bank of China, $3.402bn. The recent report based on an analysis of data on actual external debt service payments from the Debt Management Office, revealed that Nigeria paid the World Bank a total of $1.19bn, which included $854.48m to the International Development Association and $341.57m to the International Bank for Reconstruction and Development. The statistics further revealed that a total of $591.11m was paid to the Exim Bank of China, for nine projects for which loans were taken. The projects included Nigeria Communication Satellite Project, Nigeria National Public Security Communication System Project, Nigeria Railway Modernisation Project (Idu-Kaduna Section), Nigeria Railway Modernisation Project (Lagos-Ibadan Section), Nigeria Abuja Light Rail Project, Nigeria ICT Infrastructure Backbone Project, Nigeria Four Airport Terminals Expansion Project, Nigerian Zungeru Hydroelectric Project, Nigerian Rehabilitation, and the upgrading of Abuja-Keffi-Makurdi Road Project. Breakdown of the report further revealed that Nigeria paid $302.17m to World Bank and $58.79m to the Exim Bank of China in 2016, while $151.91m was paid to the World Bank and $65.01m to the Exim Bank of China in 2017. In addition, it paid $183.44m to the World Bank and $133.05m to the Exim Bank of China in 2018, while $238.73m was paid to the World Bank and $138.77m to the Exim Bank of China in 2019. In 2020, Nigeria paid $319.80m to the World Bank and a $195.49m to the Exim Bank of China.
The report on the borrowings showed that among others, on December 14, 2020, the World Bank approved a $1.5bn loan for Nigeria, earmarked for two projects, namely Nigeria COVID-19 Action Recovery and Economic Stimulus Programme and the State Fiscal Transparency, Accountability, and Sustainability Programme. Also the bank had on June 27, 2018, approved a loan of $775m for the Fiscal Governance and Institutions Project, Nigeria Erosion and Watershed Management Project (additional financing), Nigeria Polio Eradication Support Project (additional financing), Nigeria Electrification Project and the State Fiscal Transparency, Accountability and Sustainability scheme.
The rising profile of Nigeria’s debt in the past six months have continued to generate reactions. Recently, observations by expert over the economy have become pregnant, particularly with evident threats to the economy. In August, the threats became very reflective with the report that debt servicing gulped about 91% of the Country’s revenue in the first half (H1) of 2021. In the 2021 financial statement of the IDA, the Association had stated that Nigeria was the fifth top IDA borrower with $11.7bn debt stock.
In August, it was disclosed that the Federal government spent N2.02 trillion on debt servicing in H1, 2021. This figure represented 90.5 per cent of the total revenue of N2.23trn generated by the Federal government within the period. The Technical Adviser to the Director General of the Budget Office, Alfred Okon while presenting the “Overview of FGN 2022 Budget Call Circular” in August had in the presentation of a report at a training on “Government Integrated Financial Management Information System Budget Preparation Subsystem For Ministries, Department and Agencies,” stated that as of June 2021, the revenue retained by the Federal Government was N2.23trn, which is 67.3 per cent of pro-rata target of N3.3trn for the review period. The total revenue comprises oil revenue of N492.44billion; non-oil tax revenue of N778.18bn; Company income tax of N397.02bn; Value Added Tax of N129bn and Customs collections of N234.02bn.
The narratives of debt profile in the Country have become unsavoury. The heaping of debts which have not shown impacts of positivity on the economy, pose paradox that demands coordinated attention. Giving perspective to the analytical impacts of the prevailing revenue to debt-servicing ratio, speaks volume of the threats that the burden of debts now pose to the Country’s economy. It is however lamentable that despite the evident strains, resort to borrowings more recently has continued to take course. The prevailing situation where larger chunk of revenues now go into debt servicing poses calls for restraint on the Government. It has become alarming that the need for the Government to apply caution in its resort to borrowings, governed by untactical principles, is sacrosanct.
The burdens of debt servicing have become a threat to economic growth in the Country. It is important that the Government begin to direct diplomatic efforts towards securing debt forgiveness for the Country. According to a World Bank brief on ‘COVID-19: Debt service suspension initiative’, Nigeria is not a beneficiary of the bank’s debt service suspension initiative established by G20 countries, despite its increasing debt and the potential of saving the country $432.6m in 20 months, from May 2020 to December 2021. Efforts towards diplomatic measures for debt forgiveness have proven their benefits in the past by coordinated efforts of previous administrations. It is important for the present Government to muster strategies towards this end, putting in view the prevailing strains on the economy and the irreconcilable clogs pose by the burdens of debt servicing.
