DERIDING strident advice to halt his borrowing spree, the President, Major General Muhammadu Buhari (retd.), has requested the Senate to approve fresh promissory notes of N402 billion. This will take the debt stock to close to N43 trillion. Inexorably, Buhari is sentencing future generations to a bottomless debt peonage pit. Without tangible landmarks to show for past loans, it is double jeopardy. The National Assembly should boldly stamp a moratorium on new loans in Buhari’s remaining tenure.
Not that borrowing is fundamentally bad economics; many governments borrow to reflate the economy, meet short-term commitments and provide critical infrastructure. In Nigeria however, the government’s notorious penchant for squandering all revenue makes borrowing a high-risk venture. Buhari’s reckless debt acquisition amid low public revenue is not sustainable and has serious negative long-term implications.
There are visible capital projects on display from the borrowings by Egypt’s president, Abdel al-Sisi, including the $5.6 billion Suez Canal, a $25 billion nuclear reactor plant that gave Egypt surplus electricity, a $40 billion housing project for low- and mid-income earners, and the Tahya Misr Bridge over the Nile, the world’s widest suspension bridge.
In contrast, Nigeria has very little to show for its avalanche of loans. The regime boasts of some rail projects completed and the Second Niger Bridge nearing completion. But many others remain uncompleted. The Lagos-Ibadan Expressway has been undergoing its latest reconstruction since 2013; several rail projects anchored on Chinese loans are stalled. The regime has not improved the electricity power supply in seven years, and the transmission network experiences frequent system shutdowns. A $500 “airport remodelling” million loan from China under Buhari’s predecessor did not significantly improve the dilapidated airports.
Buhari is addicted to debt. Inheriting a debt stock of N12.11 trillion in June 2015, this has risen exponentially in the past seven years, according to Debt Management Office, jumping to N17.51 trillion in 2016. Between June 2015 and September 2021, total national debt stock staggeringly added N25.94 trillion to hit N38 trillion, an increase of 208 per cent.
Saddled with economic policies defined by statism, and caught in the global headwinds from COVID-19 and Russia’s war on Ukraine, there is no let-up for the country. As of first quarter 2022, Nigeria had accumulated a N41.60 trillion debt. By Q2, it stood at N42.84 trillion of which the central government owes N35.7 trillion.
Instructively, the Federal Government was unable to acquire any external loan in Q2, depending exclusively on domestic borrowings, says the DMO. Exploiting Ways and Means, it is reportedly exposed to the Central Bank of Nigeria to the tune of N20.6 trillion.
At the current rate of acquisition, it is projected that Nigeria’s debt will reach N55 trillion by 2025. Already, debt servicing is snaring the bulk of government income. Between January and April, debt servicing, at N1.97 trillion, outstripped retained income by N300 billion (N1.67 trillion). In 2022, the budget deficit topped N6.26 trillion. It is set at between N11 and N12 trillion in the N19.2 trillion 2023 budget. That is bad news for everybody. The Minister of Finance, Budget and National Planning, Zainab Ahmed, foresees capital expenditure receiving zero funding next year.
At the sub-national level, things are equally catastrophic. Although external borrowing has reduced at that tier (plus the Federal Capital Territory) to N1.89 trillion as against N1.97 trillion as of June, domestic borrowings are rising sharply. Between January and June, they incurred N0.82 trillion, increasing their combined debt stock by 18.5 per cent.
Buhari’s frequent recourse to blaming external factors and his predecessors ignores his own failings; he is a pathetic economic manager trapped in his statist thinking. He rejects modern models to unleash the power of private capital by privatising the commanding heights of the economy. This has shut out much-needed investment; the Central Bank of Nigeria said foreign direct investment slipped into a negative of $182.50 million in Q1 2022, from $41.96 million the previous quarter. To overcome this, Buhari should turn Nigeria to a choice destination for investors by improving the ease of doing business. Nigeria currently ranks 131 out of 190 jurisdictions on the World Bank’s EoDB table.
Still, Buhari has not come to terms with the harsh reality. Recently, he heedlessly approved an increase in the travelling allowances of civil servants. Such spending is not tied to any new income source. Years after a presidential panel recommended mergers and scrapping of many MDAs, nothing has been implemented. Illogically, Buhari and NASS expand government by establishing new tertiary institutions.
But determined action can bail out the economy. That should start with critical MDAs like the Nigerian Ports Authority, the Nigerian National Petroleum Company, the Nigerian Maritime Administration and Safety Agency transparently duly remitting revenues to government coffers. In a fresh alarm, the Revenue Mobilisation Allocation and Fiscal Commission said 2,119 mining companies owed the government N2.76 billion, the annual service fees for their mineral titles.
Among others, judgements should be enforced to reboot the economy, including a 2018 judgement on oil sharing contracts by the Supreme Court ordering the international oil companies to pay $62 billion to the government. Instead of collecting its due, a report says waivers to multinationals over a three-year period cost Nigeria N16.76 trillion.
Furthermore, Buhari has consistently resisted privatisation of state-owned commercial assets, especially in the downstream oil industry, and of the Ajaokuta Steel Company, the airports, and the seaports. The inhibitory Railway Act 1955 should swiftly give way to liberalisation to attract sizeable FDI, just as telecommunications has been doing since 2001.
Apart from freezing the establishment of new universities—and merging some—Buhari should strongly tackle corruption, including in the security agencies fingered repeatedly in the industrial scale oil theft.
Ultimately, the Federal Government should deploy financial technology solutions to collect its dues from the MDAs, increase the tax-to-GDP that is 6.0 per cent and decentralise the policing system to guarantee security. The sub-national governments should stop depending on sharing oil money but transform their states to virile economic units. The NASS should stop rubber-stamping Buhari’s loan requests.
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