Nigeria’s rising debt profile: Govt’s good intentions are not enough, only implementation

Turning attention to borrowing most recently has attained a level of constancy in the choices of the   present Administration. The resort would obviously be given explanation as an attempt to cover up for deficits in infrastructures demanding capital provisions for their execution. It is however, troubling that the reoccurring turn to obtaining loans at sporadic frequency has brought the fear of the risks that such resort pose before the Country in the nearest future. It is observable that the debt profile the Country has heaped up in the last six years has been at a disturbing height. The perception of the threats send stronger notations of dangers when consideration is given to the debilitation of the economy with precipitating strings of acute strains despite the increasing borrowings. Hence, the worsening of socio-economic conditions despite the borrowings, send signals that the loans have not translated into better conditions of living as would be expected.

Although, it is evident that borrowings in the last six years has significantly heaped up the debt profile of the Country, without concrete results of improvement on the economy, it is observable that the resort to borrowing by the present Administration has not ceased; rather, more proposals by the Government at acquiring new loans continually surface.  The Senate on Wednesday again approved a total of $6.18bn (N2.3 trillion) External Loan request by President Muhammadu Buhari to fund the 2021 budget deficit.  The approved foreign loan is for the issuance of $3,000,000,000,  but not more than $6,183,081,643.40, Eurobond in the International Capital Market for the implementation of the new External Borrowing of N2,343,387,942,848, for the financing of part of the deficit, authorised in the 2021 Appropriation Act. The amount authorised above, according to the Senate, may be raised from multiple sources such as the International Capital Market and any other Multilateral or Bilateral sources as may be available. The approval was effected sequel to the consideration of the Senator Clifford Ordia, (Peoples Democratic Party), Edo Central-led Senate Committee on Local and Foreign Debts. Consequently, the Senate has directed the Minister of Finance, Budget and National Planning, the Director-General of the Debt Management Office, and the Governor of the Central Bank of Nigeria to submit to the National Assembly within ten (10) working days (excluding the day of close of trading) a letter containing the United State Dollars amount so raised and received as a result of the above approval together with the applicable exchange rate.

While it is known that borrowing in its entirety cannot be argued not to have its benefits, it is pertinent not to be easily distracted and drawn away from the risks that such resort pose when they are not judiciously utilised. The practice in Nigeria with a prevailing system saturated with leakages through which public funds meant for development courses suffer the fate of corrupt inclinations which have been one major pestilence deeply inimical to loans achieving their intended objectives, is a threat. It is known that the poor system which guides the supervision, monitoring and evaluation of funds disbursed to execute capital projects, has left open, gaps exploited for subterranean purposes against popular interests. The situation becomes more troublesome when such funds are those sourced from loans. The thought of the potency of the evident ravages that the failure of such projects (for which loans were acquired for) hold against achieving the intended purposes for returns to be made for repayment, is a necessary evil that has the potential of plunging the Country down into chaos in the nearest future.

While there has been record of debt forgiveness for the Country in the past, particularly on loans acquired from international financial institutions, it is essential to frankly state that drifting once again to that depth of  embarrassing posture of debts, holds not only disparaging damages to the image of the Country, but speaks volume of ravaging threats against her economy. It is pertinent to note that the burdens of debt servicing most recently is pushing the Government towards an end where executing capital projects would hardly be feasible except for continuous turn to borrowing at ridiculous conditions.

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 N3.27tn and represented about 10 per cent over the budgeted amount of N2.95tn. 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 N3.32tn 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. It would be noted that the significant skyrocketing of the total debt profile of the Country from N12.6trillion as at September 2015, the year the present Administration came into power, to N33.10trillion as at March 31, 2021 which is well above 100 per cent, calls for attention.

It is hence, pertinent to state that while the National Assembly has moved to approve another loan to the sum of N2.3trillion, the need to ensure the utilisation of the borrowed funds are judiciously channeled appropriately to achieve the desired objectives with concrete results, is paramount. More important is the need to redefine the systemic patterns of operations for project execution, with overarching metamorphosis of the structural lines of public finance to restore sanity into the processes. This is essential to guide against and halt the possibilities of the threats of failure which the prevailing system has over time subjected borrowings to. Hence, while good intents may be the drive for acquiring such loans, it is instructive to note that such intents could be defeated where endemic decay in the system undermines the purposes which such efforts would have achieved.