Salvaging Nigeria’s Debt Crisis

Barely two decades after Paris debt cancellation, Nigeria’s sovereign debt has reached an all-time high with over $103 billion (N42.8 trillion). Nigeria appears to be heading towards another debt crisis. It is against this backdrop that the Civil Society Legislative Advocacy Centre (CISLAC) with support from Christian Aid (CA) organised a one day forum on media presentation of research on the role of private creditors in Nigeria’s debt crisis where stakeholders agreed that for governments to desist from borrowing, it will have to maintain a realistic debt management model to help improve debt sustainability and fiscal prudence, Sunday Ehigiator reports

The history and roles of international finance can be traced to 1944 when the two Bretton Woods institutions-World Bank, International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF) were created to respond to the global need for development finance.

With no provision for the private sector, over the years it remains a godfather to government of various nations in lending money. As nation grows, so its financial needs increases and in the absence of resources, it will look for a way to sustain its economy. The accountability and transparency advocacy group’s main cry is predicated on the fact that despite the loans being taken, successive administrations in the Africa’s most populous country have been unable to meet their obligations either for national economic growth and development or better life of the people, who are supposed to be major reason of government system. It has been two decades after Paris debt buyback that saw Nigeria’s sovereign debt crashed to an almost ground zero, the debt burden of the country has now reached an all-time high of over $103 billion (N42.8 trillion) as at March 2022.

It is against this backdrop that the Civil Society Legislative Advocacy Centre (CISLAC) with support from Christian Aid Nigeria embarked on a one-year research to address the self-inflicted financial burden. At a one day forum on media presentation of a research on the role of private creditors in Nigeria’s debt crisis, stakeholders urged governments to desist from borrowing, embark on capital expenditure that will promote GDP and also maintain a realistic debt management model to help improve debt sustainability and fiscal prudence. The research was a product of a 12-month project that centers on revealing and challenging the role of private creditors in hindering people’s recoveries to enhance the urgency with which the international community must address sovereign debt crises. The research was commissioned to fully highlight the Nigerian context and dimensions of the indebtedness to private creditors for policy options and deliberate efforts to ending it. According to the organizers, the ultimate outcome of the project aimed to contribute international financial architecture and macroeconomic environment that enables the fulfillment of human rights and the undertaking of climate action in economies that center on care.

In his opening remarks, Executive Director, CISLAC, Auwal Musa Rafsanjani who spoke virtually via zoom, said the research became necessary because as Nigerians, ‘we can’t allow the government to put us into perpetual poverty because we have an analogue governments that are lazy to invest in human capital.’ This advocacy journey by CISLAC with support from Christian Aid became imperative because it will help prevent the future generations from the burden of debt.”

“We find today’s engagement crucial to amplifying the interests of the 130 million multi-dimensionally poor Nigerians, as well as a huge percentage of those who sit above the poverty line, whose lives, livelihoods and future are being impacted by gross lack of adequate investment in critical social sectors and the growing threats of climate change.

“As we all know, Nigeria is presently in a debt crisis- with a fiscal deficit well above the statutory threshold of 3%, an increasingly unsustainable debt profile, a rising cost of debt servicing worsened by the rising interest rates, and socio-economic investments sacrificed at that expense.

CISLAC Collaborations

Speaking further about CISLAC collaborations on a series of engagements, he said, “This included a research commissioned to fully highlight the Nigerian context and dimensions of the indebtedness to private creditors for policy options and deliberate efforts to ending it as well as a policy roundtable on the modality for setting a debt limit as a veritable mechanism for providing the parameter for checks and control of the debt stockpile of all the tiers of Government and ultimately avert a national public debt crises of bankruptcy proportions.

“As we share the findings of this research today, we hope that it contributes to protecting the interests of present and future generations by spurring present and incoming governments in Nigeria to commit to and take urgent actions to salvage the country from the current and impending economic throes,” Rafsanjani said.

While making his presentation on the FORGE research findings, an evidence based research on the role of private debtors in Nigeria’s debt crisis, Research Consultant, Botti Isaac clearly explained the problems with patronising private creditors, the evils doing so accrues to a nation of Nigeria’s stature and why, despite the gains of accessibility of it Nigeria has remained at same point neither being to meet its obligations nor move forward.

Noting that the loans problem is just by the Federal Government but also the 36 states of the Federation, Isaac said the major issue is because the law or legal framework guiding borrowing in the country does not support doing so outside of multi-lateral and bi-lateral arrangement. He, however, faulted the requirements for accessing loan by the private creditors, which make it easy for government to take, but insisted that, as civil society groups and media organisations, they would continue to talk until the right thing will be done to save the soul of Nigeria from burden of such debts.

He said, “We need to be concerned because most of the loans and their private creditors are not known to the public. The law is that loan can be taken from multilateral, bilateral and at conventional interest rate. We also need to be concerned because it is difficult to understand the terms and conditions under which these loans are obtained, which is not the case if they were taken from the sources approved within the legal framework for borrowing.

“We need to be concerned because, despite that we borrow, we are still unable to meet our obligations,” adding that the problem is because some people just wake up and want nothing more or less than taking loan. Parameter for checks and control of the debt stockpile of all the tiers of Government and ultimately avert a national public debt crises of bankruptcy proportions.

Borrowing irresponsibly

Corroborating the CiSLAC boss, the head of Programmes, Christian Aid Nigeria, Victor Arokoyo said government can’t be borrowing irresponsibly because it will have negative impact on the generations to come. We support CISLAC on the research to know where they are borrowing the money and what the money is being used for.

Arokoyo said the 75-year-old international faith-based development and humanitarian organisation that will be 20-year-old in Nigeria next month, believes that poverty is not a product of nature but of a systemic manipulation of the economic system skewed against some people and make them to be poor.

“In line with our economic justice, social and political justice, we are part of the tax justice and political platform in Nigeria. One of the things we are doing around that governance platform is campaign for private creditors to begin to see the need not to give Nigeria loan again because their loan is costing government the ability not to respond to public services. For example, you can see from the graph that was shown by the research consultant, that such money is spent on servicing debt compared to what is spent on education and health. And then, our debt and revenue ratio, you can see that we are borrowing now to pay debt. I borrow Mr. A’s money, I can no longer pay. I will go and borrow from B to pay A. For instance, foreign exchange violability has been contributing to the rise in foreign exchange debt, thus, higher debt burden results from constant depreciation of local currency.

“So, there is no wisdom in it and there are other sources from which we can get money to address this. Particularly, what government is currently doing is against the law. The law prescribes the kind of loan you can take and where you can take it from. What government is doing now is to go outside that legal framework to collect loan anywhere the money is available and then put the country in serious debt burden. So, we are interested in widening the knowledge of citizens about this issue and possibly for citizens to demand from the government the need to look inward. Let us have some period of pains now so that we can have gains tomorrow, rather than have gains now and our children will have pains tomorrow, ”he said.

Boosting Revenue generation

At end of the robust media dialogue, recommendations were made that the government must embark on venture that will boost its revenue generation, reduce reliance on borrowing from the international capital market, maintain a realistic debt management model to help improve debt sustainability and fiscal prudence, improve public borrowing transparency and accountability, strengthen the foreign exchange policy to reduce the impact of volatility on loan repayment, strengthen legislative review approval processes to ensure that only concessional loans are approved and to establish an independent committee that comprises CSOs representatives, the auditor general office, the Ministry of Finance and the DMO to carry out independent review of all future loan requests with the view to determine their variability and importance.

The CISLAC boss ended the discussion by calling on the National Assembly to save the country from imminent economic collapse and also call on the three tiers of government to develop realistic economic policy that will curb recklessness.