Nigeria may not be the most indebted country in the world but the penchant of the government to borrow at will without judiciously utilising said loans in critical development projects is pushing the country into uncertain times.
Last week, President Muhammadu Buhari had requested the Senate to approve sovereign loans of up to $4.05 billion (N1.6 trillion) and €710 million (N342.4 billion) as well as grant components of $125 million to be committed to 145 projects spread across the six geo-political zones of the country. The loan is under the 2018-2021 medium-term (rolling) external borrowing plan.
The request which was contained in a letter written by the President, also noted that the sovereign loans will be sourced from the World Bank, French Development Agency (AFD), China-Exim Bank, International Fund for Agricultural Development (IFAD), Credit Suisse Group, and Standard Chartered/China Export and Credit (SINOSURE).
The loan, if approved, would shoot up Nigeria’s foreign debt burden to $45 billion (N18.5 trillion) representing a 366 percent rise in 2015 when the total outstanding foreign debt was $9.7 billion.
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It would also mean that the current administration has acquired the most debt at $35 billion within 6 years of existence. Approval of the new request will also bring the total approved foreign borrowings in 2021 alone to $12.3 billion (N5.06 trillion.)
At this rate, we believe it is time to slow down. The current situation where 80 percent of the generated revenue is committed to debt servicing is simply not sustainable for the future development of the country.
Recently, the Centre for Social Justice (CSJ) presented a paper ‘Analysis of the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper’ which was quite revealing of how Nigeria has been spending its revenue.
The paper brought to light that the government had committed a total of N11.6 trillion into debt servicing, while N8.31 trillion was expended on capital and development expenditure between 2015 and 2020. A breakdown of the amount shows that in 2015 and 2016, N953.6 billion and N1.4 trillion, respectively, were spent on debt service, while N1.8 trillion and N2.2 trillion went into the same line item in 2017 and 2018 respectively.
Another report on the government’s public debt and interest payments between 2015 and 2019 also showed how much was going to debt servicing on a daily basis. According to the report presented by Kalu Aja, an economic expert, Nigeria pays $2.9 million every day to service foreign loans as of 2019. At that cost, it means the country pays $20.3 million (N8.4 billion) as interest every week.
The biggest challenge with collecting loans in Nigeria is that a significant proportion of the loans are appropriated for recurrent expenditure, this is despite being collected on the assumption that the loans would be used for capital expenditure. We do agree with many who have said that if all the loans collected by the government over the years were actually used for the capital projects they were given for, no part of Nigeria would be languishing today in underdevelopment.
We must also add that continuing to borrow at a time when productivity in the country is very low is tantamount to mortgaging the future of Nigeria. The exchange risk that balloons Nigeria’s borrowings in naira value will also be amplified with continued external loans.
It is time to get serious with increasing production capacity. Manufacturers should be encouraged to go back to work by creating and reviewing policies to conform with 21st-century realities. Prioritising production as against loans is the fastest way to get young people back to work reduce the rising unemployment figures in the country. Creating jobs has the twin benefits of reducing poverty and insecurity in the country.
