Nigeria has added N25.04 trillion to its initial debt in less than seven years
Barely 16 months to the end of President Muhammadu Buhari’s second and final term in office, the window of opportunity to deliver the promised strong economy and secured nation is becoming narrow.Indices such as dwindling earnings, mounting debts, unaffordable debt servicing, deepening macro instability, rising insecurity, and waning public goodwill appear to be working against the President’s desire to finish strong.
To be sure, from May 2015, when the President inherited what his cabinet members have described as “a dying economy,” till date, Nigeria’s public debt stock has increased by over threefold. Precisely, the country has added N25.04 trillion to its initial debt in less than seven years.
As of the first quarter of 2015, the country’s public debt stood at N12.06 trillion, a figure that has ballooned to N38 trillion as of last September, recording a growth of 208 per cent.
The Debt Management Office (DMO) did admit the existing WMF was a challenge and disclosed a plan to convert it to a 30-year debt instrument. As at early 2021, the amount, which is not captured by the national debt reporting, was estimated at N10 trillion. At a media function later last year, the DMD Director-General, Patience Oniha, could not give the updated figure but confirmed that, “it was estimated at N10 trillion earlier in the year.”
Since about a year ago when DMO said it would convert the opaque WMF to a long-term instrument, no update on the intention or the status of the debt has been given again. The absence of full disclosure of the WMF outstanding is but one of the many pieces of information about the country’s debts shrouded in secrecy.
Successive administrations have bandied low debt-to-GDP ratio as a licence to borrow more. Interestingly, the government falls back to revenue, not GDP, to service or amortise debt instruments. Agriculture contributes over 20 per cent to the country’s nominal GDP. Sadly, the mainstay of the country’s revenue is neither agriculture nor manufacturing but oil, which contributes less than 10 per cent of the national output.
In the same logic, agricultural activities are majorly tax-exempted, implying that the sector is not a cash cow. This suggests that sectors that drive GDP, which historically informs government’s borrowing, do not provide the liquidity needed to service debt, economists have argued.
In 2020, which is still the most recent complete data on economic performance, the government spent N2.43 trillion, which was 71 per cent of the amount available for budget funding, on debt servicing. This was contained in the budget implementation report released by the Ministry of Finance, Budget and National Planning a few weeks ago. The overall figure was a modest deceleration from 99 per cent recorded in Q1 2020 when the government earned N950.56 billion and incurred N943.12 billion on debt-servicing.
As at September last year, the debt servicing to revenue ratio of the running budget was 65 per cent. The Federal Government had spent N2.57 trillion servicing debt within the period its earned revenue was N3.95 trillion.
Prof. Sheriffdeen Tella of the Olabisi Onabanjo University aligned with Owoh’s argument, saying that the government should prioritise health and education while scaling down investment in road and airport infrastructure. The scholar said the persistent uncertainty around revenue makes the times more “precarious.”
“Government should also align the cost of governance with the economic realities. We cannot continue to run a bogus structure while we continue to borrow money. In delivering infrastructure, we can also explore public private partnerships (PPP); that is for essential infrastructure. In reality, we can do without some of the infrastructure till when the economy improves and we have the capacity to execute them,” Tella said.
Currently Nigeria’s per capita public debt, the current officially declared debt translates to N190, 300, which is 53 per cent or over half of yearly minimum earning of a civil servant. This amount is the nominal amount the government has incurred on behalf of every Nigerian, including 23 million unemployed citizens. But Okonjo-Iweala had said that the real cost of Nigeria’s rising public debt is the inability of the country to fund projects that could positively affect the socio-economic life of an average citizen.