The Federal Government’s resort to excessive borrowing since the coming to power of President Muhammadu Buhari, almost six years ago, has been decried by many Nigerians. Experts believe that the administration’s penchant for binge borrowing will mortgage the future of Nigerians. From $18.89 billion it inherited in May 2015, Nigeria’s national debt stock has risen to over $32billion as at December 2020. The nation’s rising debt profile is disturbing. In its latest report, the nation’s Debt Management Office (DMO) revealed Nigeria took loans worth $31.98 billion from the World Bank Group, International Monetary Fund(IMF), African Development Bank(AfDB) Group and other financial institutions. According to the report, Nigeria has an outstanding $10.74 billion loan to be paid to the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD). Also, the report showed that Nigeria owed the IMF $3.45billion and $2.24billion to Africa Growing Together Fund and African Development Fund. This is in addition to debts Nigeria owed four international lenders: the Arab Bank for Economic Development in Africa (BADEA), Islamic Development Bank (IDB), International Fund for Agricultural Development (IFAD) and the European Development Fund(EDF), all totaling $298.12 million. Besides, Nigeria owed China, France, India and Germany $4.07 million. This accounts for 12.74 per cent of the nation’s external debt. According to DMO, these include $3.26 million to the Export Import (EXIM) Bank of China, Agence Francaise Development,($502.38 million), Japan International Corporation Agency, $78.20 million, Exim Bank of India, ($37 million)and Kreditanslt Fur Wiederaufbua ($193.26 million). With these unpaid loans, Nigeria may be approaching debt overhang in the nearest future, if the economy does not recover quickly and government’s revenue generation remains weak.
About two months ago, the Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed that Nigeria’s total public debt might reach an all-time high of N38 trillion by December 2021. The minister who appeared before the Senate Committee on Local and Foreign Debt, noted that “the total public debt stock comprising the external and domestic debts of the federal and state governments and the Federal Capital Territory (FCT) stood at N31.01($85.90billion) as at June 30, 2020.” The debt, she added, “is projected, based on existing approval to rise to N32.51trillion by December 31, 2020 and N38.68trillion by December 31, 2021.” Already, the Federal Government is seeking fresh $1.2billion external loan from Brazil for agricultural programmes in the 2021 budget. The request has been sent to the National Assembly for approval. The fresh loan, Ahmed stated when she appeared before the House of Representatives Committee on Finance, will help address issues in the agricultural value chain, as government will require 100,000 hectares of land in each state for food production.
The rising borrowing and spending, experts say, may raise the nation›s debt servicing to N4trillion by 2022. Currently, over N3.2trillion is provided in the 2021 budget for debt servicing. The Finance Minister attributed such loans to numerous abandoned road projects across the country and poor funds releases occasioned by dwindling revenue. The government had already spent N162billion Sukuk fund on 45 roads cut across the six geo-political zones. We have cautioned against the rising debt profile of the administration. Even though we are not necessarily against borrowing, we think that such loans must be exceedingly necessary and should be used for projects that can repay them. Experts have warned that binge borrowing is not sustainable. It can also halt economic growth and recovery that the country needs now. While the effect of the increasing debt might not be immediate, it could be catastrophic in the long term with a chunk of revenue going for debt servicing at the expense of infrastructural development. This is already evident in the 2021 budget, which made provision of N3.2trillion for debt servicing.
In all, we urge the government to broaden its internal revenue generation mechanisms rather than relying so much on public borrowings to finance budget deficits. We believe that the present budget deficit of N5.20trillion would have been avoided if government had deepened its revenue base. With the national debt stock on a steady rise, it has become expedient to comply with the Revised Guidelines of the 2020 DMO on External and Domestic Borrowing for the federal and state governments, the Federal Capital Territory (FCT) and other agencies of the government. The revised borrowing guidelines stipulated how the various tiers of government could secure loans from the external and domestic markets. According to the guidelines, to borrow externally, the Federal Government and its agencies are required to prepare a National Debt Management Strategy for the approval of the Federal Executive Council (FEC). Therefore, let the federal and state governments borrow cautiously and invest in areas that will impact on infrastructural development that can conveniently repay the loans within the agreed time without harming the nation’s economy.