At the recent 76th Session of the United Nations General Assembly (UNGA) in New York, United States (US), President Muhammadu Buhari appealed for debt relief for Nigeria and other developing countries. The president’s intervention is based on the fact that the COVID-19 pandemic has worsened the economic situation of poor countries. According to Buhari, developing countries have been grappling with unsustainable debt burdens, even as the pandemic has increased the risk of debt overhang, while essential public financial resources are now allocated to external debt servicing and repayments at the expense of domestic challenges such as health, education, and other critical developmental needs. In the thinking of the President, debt relief is the best way to enable these countries to restructure their economies.
Arising from that premise, we are of the view that Nigeria and other indebted developing countries should be considered for debt relief in line with President Buhari’s appeal. However, these countries must think of other ways to rejig their economies and should therefore not rely so much on debt relief or other palliatives from developed countries. Nigeria is currently veering dangerously to debt default to her creditors. Latest figures released by the Debt Management Office (DMO) showed that in the first half of 2021, Nigeria spent N1.47trillion in debt servicing. While there is nothing wrong with asking for debt relief, we advise the president to curtail the administration’s penchant for borrowing. There are other creative ways to revamp the economy instead of borrowing without restraint. The government should stop the thriving illegal gold mining in some parts of the country and come up with effective guidelines for the exploitation of solid minerals. The colossal amount lost to illegal mining annually, put at billions of dollars, can be used to revamp the economy. The unending borrowings by this administration will weaken his request for Nigeria to get debt relief. Although debt relief is desirable, it is important to point out that lack of transparency and misapplication of loans are some of the reasons many developing countries, including Nigeria, are in the debt mess. It ought not to be if right policies are in place and if the loans are deployed to profit yielding projects.
We believe that Nigeria can stop the borrowing binge and reduce its debt burden to a manageable level by putting in place good economic policies rather than begging for debt relief. Currently, Nigeria’s debt service-to-revenue ratio is 98 per cent. This makes Nigeria’s borrowings unsustainable. Experts have predicted that things will likely get worse with Buhari’s latest request to the National Assembly for another N2.5trilion loan. The fresh loan, the president explained, would be used to fund projects captured under the 2018-2021 Borrowing Plan through Sovereign loans from the World Bank and other external financial institutions. If the loan is approved, Nigeria’s debt stock will rise to over N35 trillion. Also, about 85 per cent of already matured loans are being rescheduled. In May, President Buhari got $6.18 billion loan to finance this year’s N5.6trillion budget deficit. Also, in July, the Federal Executive Council (FEC) approved the 2022-2024 Medium Term Expenditure Framework and the Fiscal Strategy Paper, authorising the funding of N5.6trillion deficit envisaged in the 2022 budget through borrowings. With dwindling oil revenue, the government’s resort to binge borrowing is not sustainable. Nigerians are worried that the government will eventually mortgage the future of the country if the borrowing spree is not curtailed forthwith. Government should stop the over-dependence on oil revenue and aggressively diversify the economy. The reliance on crude oil, at the detriment of non-oil exports, has made the economy vulnerable. It is disturbing that under the present administration, Nigeria’s public debt has ballooned so high, from N18.89 trillion in June 2015, to N33.11trillion as at March 2021. This represents about 296 per cent rise in six years. So far, Nigeria has borrowed not less than $31.98 billion from the World Bank Group and other financial institutions. Let the nation’s tax base be sufficiently increased in such a way that the government can earn much money through adequate taxation. Many countries are run through efficient and effective tax administration. Nigeria can borrow a leaf from such countries that have efficient tax system.