NIGERIA AND THE DEBT TRAP

Ayo Oyoze Baje argues that the country’s debt burden is excessive

“Our political leaders have suddenly developed not just a taste for, but a voracious appetite for debt. As usual, most of such debts that are procured are hardly thought through. Predictably, ability to repay such debts is lacking”

-Chief Olusegun Obasanjo

One recurring ugly decimal of Nigeria’s inexcusable economic paradox in the midst of abundant God-endowed resources is the ever-increasing debt profile, at both the state and federal levels. It is sad to note that it has been so over the decades, spanning different administrations with variant political colourations.

More worrisome is that there is inadequate empirical value on ground, that is in terms of infrastructural development, appreciable human development index and economic production for the humungous sums of money so borrowed, year after year. It would seem that our set of successive political leaders have refused to adhere to the biblical admonition that: “The rich rule over the poor, and the borrower is slave to the lender,” according to Proverbs 22 verse 7.

It would be recalled that yours truly has over the years raised the alarm on the critical issue, as a concerned citizen. These include the ones titled: “Nigeria’s debilitating debt profile” (January 2013), “Who will pay these huge debts?” (July, 2017), “Nigeria’s dehumanizing debt profile” (July, 2019) and “Nigeria’s free fall into China’s debt trap” (July 2020) as published by different newspapers and magazines. But painfully, things have not changed for the better ever since.

For instance, as of 8th July 2021 the news media was awash with the following headlines: “Fresh loan request pushes Nigeria’s public debt to over N35.5 trillion”. “Buhari gets Senate’s approval for N2.3tr foreign loan request”. “FG to fund N5.62tr deficit in 2022 budget with loans”. “Nigeria on debt precipice, spent N1.8tr on debt servicing between January and May 2021”. “Government records debt service to revenue ratio of 98%”! You should be similarly worried about these scary economic indices.

The reason is simple – one does not want Nigeria, our dear country to go the way of some other African countries that are currently enmeshed in the debt marsh to China. For instance, as of 2020, the countries in Africa with the largest Chinese debts include Angola ($25 billion), Ethiopia ($13.5 billion), Zambia ($7.4 billion), the Republic of Congo ($7.3 billion) and Sudan ($6.4 billion).

The warning given here is that our current political leaders should prevent Nigeria from being taken over by the overtly ambitious China because all Chinese loans are tied to infrastructural developments. In fact, some of the African debtor nations have had to forfeit some to China. For instance, $7.4 billion of Zambia’s total $8.7 billion foreign debt is owed to China. It was reported in late 2018 that China may soon take over the state electricity company, ZESCO as a form of debt repayment since the country had defaulted!

Also, Kenya may soon lose its largest and most lucrative port, Port of Mombasa to its creditor (China) after it defaulted in the refund. This could force Kenya to relinquish control of the port to China.

This unfortunate economic situation throws up some salient questions, all begging for answers. Have we, as a country not been making money from crude oil sales, multiple company taxes including VAT, inflow from the ports and that from the Customs Service?

It would be recalled that back in June, 2017 Prof. Pat Utomi and Mr. Bismarck Rewane, both seasoned economists asked questions about the increasing debt burden at both the state and federal levels. As at March that year the nation’s total debt had risen by N7.1trn to a mind-boggling N19.16trn.

While as at June 30, 2015 the country’s total debt was N12.12trn by September 2018, the debt stood at N22.43trn. That means that within the first three and a half years of the current administration the debt rose by N10.31trn which is 85.06 %. The external debt component of both the federal and state governments including the FCT increased by 109.21% according to the DMO. Are you not worried?

Fast forward to 2019. Dr. Akinwunmi Adesina, President of the African Development Bank(AfDB) raised similar concerns to that of Utomi and Rewane. According to him, Nigeria was as at that year using 50 per cent of its revenue to service its debts, compared to the average of 17 per cent for other African countries! This is unsustainable.

Furthermore, going by the frightening figures made public by the Debt Management Office (DMO) the total debt stock stood at some humongous amount of N24.047 trillion as at March 31, 2019. Reports have it that N560 billion out of these was borrowed in only three months!

In fact, on May 21, 2020 the online platform ‘Nairametrics’ in its ‘Economy & Politics’ page warned about Nigeria falling into China’s debt trap. According to Dr. Bongo Adi, the Director of Centre for Infrastructure Policy Regulation and Advancement (CIPRA), Nigeria lacks accountability, transparency, and responsibility to refund its loans. He is of the Lagos Business School and surely knows his onions.

We surely do not need rocket science to understand that the country’s economic growth is undermined by the huge debt stock as well as other obvious factors include sheer profligacy in running government apparatus. With decrepit infrastructure and some 23 out of 36 states at a point unable to pay 100% salaries to deserving workers there is crass corruption in high places.

This is exacerbated by the huge pay package of political office holders, with that of our lawmakers ranking amongst the highest in the world, even as Nigeria remains the poverty capital of the world. All these have no doubt led to an unprecedented unemployment level and an upsurge in the wave of crimes.

The way forward is for government to cut its economic coat according to available resources. It should allow for a holistic economic restructuring so that the states can control their resources and pay an agreed percent of income as tax to the federal centre.

We have to become more creative now so that the commercial banks can start lending to the real sector to boost manufacturing. Government should ban sundry consumables including textile materials and electronic equipment that are either being imported daily at astonishing rates and giving smugglers a field day.

One’s current concern, however, is who will pay these huge debts? Will the burden being left by the reckless and frivolous political class not be too weighty for the lean shoulders of our jobless children? Those in government should heed the words of caution by Chief Obasanjo so that generations yet unborn will not be turned to slaves and beggars in their own country by the creditor nations.