• Saturday, July 13, 2024
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Ladies first (and last) (1)

Nigeria debt

I congratulate Nwamara Catherine Nnaji, FCA on becoming the new National President of the Society of Women Accountants of Nigeria [SWAN]. It is not by pure happenstance that the current President of the Institute of Chartered Accountants of Nigeria (ICAN) is a lady – Comfort Eyitayo FCA.

Unknown to most people women accountants, (going by the research findings/surveypublished recently by a highly reputable organisation) wield enormous influence in the affairs of our nation not only in their own right but also as wives, mothers, sisters (and other relationships) to very powerful decision-makersright across the entire gamut – The Presidency; The National Assembly; The Judiciary; the Civil Service; Security Services (Army, Navy, Air Force, Police, Department of State Security Services) and the press. Of course, women Accountants are in the Cabinet (example; Zainab Ahmed, Minister of Finance); the banks; oil and gas sector (example; NNPC and its Joint Venture Partners); telecommunications; agriculture; commerce and industries; power etc.

Let us summon the courage to look beyond the pouting glamour girls who adorn the glossy magazines as “Influencers”. Our nation is in crisis and we are compelled to contend with a precarious future. If we are to be bluntlyhonest with ourselves, we must admit that muchof the damage has been largely self-inflicted (mostly by men!!).

This is the time to call on the women accountants to come to our rescue. We shall come back to the issue of security (orinsecurity) which is threatening our entire nation. For now, let us focus on the existential threat posed by the front-page headline of “The Punch” Newspaper of August 27, 2021.

“Troubles ahead, experts warn as debt servicing gulps 91 per cent of revenue.”

Also, on the front page of “The Nation” newspaper of the same date in bold headlines is the report:

“Government spends N2.02 trillion on debt servicing, says budget office.”

On August 28, 2021, “The Punch” newspaper devoted its front page to the following report:

“Federal Government to recover N5.15 trillion debts, says the minister.”

“The Minister of Finance, Budget and National Planning, Zainab Ahmed, indicated on Friday that the Federal Government had not recovered N5.15 trillion owed to it by third parties.”

Read Also: Nigeria’s curious case of rising debt profile amid worsening poverty

As confirmation of its deep concern, “The Sun” newspaper of August 28, 2021 delivered a pungent editorial on its front page:

“Nigeria’s worrisome debt stock”

“A new report has shown that Nigeria’s public debt stock is disturbing and may likely hit over N38 trillion by the end of 2021. The report also indicates that Nigeria’s debt portfolio, which was N33.1 trillion as at March 2021, increased by over 17 per cent between the end of last year and this year. Despite the increasing debt stock, it is disturbing that the government has announced new plans to borrow from both external and domestic markets. The Minister of Finance and National Planning, Zainab Ahmed, has disclosed that by the end of this year, the debt stock could reach N38trillion. However, some experts are of the view that it could be more than that and have even projected that it will hit N40trillion by December 2021.

The dwindling of government revenue due to volatility in oil prices in the international market will likely worsen the situation. And with less money accruing to the government from oil, it will be difficult to sustain theescalating debt. Not quite long ago, the World Bank warned that Nigeria would face imminent high-debt risk exposure due to failure to meet contractual debt obligations to creditors. But the position of the global financial institution was faulted by the Debt Management Office (DMO). In spite of that official disputation, statistics show that Nigeria is facing serious debt crisis unless the government prioritise itsborrowing plans and invest in productive sectors. As at May 2021, Nigeria’s debt service to revenue ratio was 96 per cent. This means that for every N1 earned, N0.98 is spent on debt servicing. In real terms, it means that about 90 per cent of total revenue is spent on debt servicing, a situation that is unsustainable. The matter is not helped by increasing overheads and rising infrastructure deficit. This is the worst the country has faced in decades. And the economic consequences are dire due to the apparent lack of definitive policy on how government intends to efficiently manage expenditures and reduce the cost of governance. The diversification effort, especially in the non-oil sector, has reportedly yielded little dividends because of rising insecurity across the country. Given the rise in global interest rates, which hasmade central banks in advanced economies to ponder the normalisation of monetary policy, debt service costs on external loans will rise, thereby pushing Nigeria’s debt beyond the point of sustainability. The prediction by experts is that Nigeria’s total debt stock could hit N40trillion in the coming months following the approval of the government’s plan to borrow another $6.2 billion. Between January and May this year, government reportedly spent N1.8trillion on debt servicing. The figure represents 98 per cent aggregate revenue within the period, which is 44.6 per cent lower than the projected revenue of N3.32trillion for the period. COVID-19 related shocks have weakened economic performance and revenue target. More so, not much has been done to broaden the revenue base in such a way that itwill not affect the cost of living of the citizens.

No doubt, worsening debt profile remains one of the challenges of the economy, especially since President Muhammadu Buhari came to power almost six years ago. Government policymakers have not shown enough creativity in managing the nation’s debts. For example, from $18.89 billion it inherited in May 2015, the nation’s debt stock has increased to over$32billion as of December 2020. So far, Nigeria has taken loans worth $31.98 billion from the World Bank Group, International Monetary Fund (IMF), African Development Bank (AfDB) Group, and others. It also has an outstanding $11.6 billion loan from the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD). Besides, Nigeria owes China, France, India, and Germany $4.0 billion. This accounts for 12.74 per cent of the nation’s external debt reportedly put at $32.86billion. Considering the impending economic crisis that will follow binge borrowing, the government must borrow cautiously and invest the loans in profitable ventures. Even though we are notagainst borrowing, we advise that such loans must be judiciously used for projects that can repay them. Excessive borrowing by the government will likely mortgage the future of the country. If the incessant borrowing is not checked, Nigeria will enter another debt trap. To avoid debt overhang, there should be a moratorium on borrowing by federal and state governments. Unrestrained borrowing will definitely hurt the economy.”

In the hope that the Society of Women Accountants of Nigeria [SWAN] will hopefully elicit a response where the men have failed, let me share with you a letter which I wrote to President Muhammadu Buhari GCFR: