There is a popular adage that says he who goes aborrowing goes asorrowing. Nigeria may be on its way to give vent to this very saying, going by its inordinate borrowing, especially in the recent past.
Nigeria got a reprieve in 2005 when its $30bn debt to Paris Club was cancelled. Unfortunately, subsequent governments since then are bent on taking Nigeria back to Egypt. In fact, the country has overshot that destination with the current outstanding at $45.5bn, over a whopping N3trn.
The current administration of President Muhammadu Buhari is accused of borrowing the most regardless of how Nigerians feel. It is baffling how Nigeria finds it so easy under this administration to resort to collecting these loans without a thought for repayment in the future.
However, unmindful of the feelings of the people, President Muhammadu Buhari has again approached the National Assembly, seeking its approval to borrow additional $4 billion ($4,054,476,863) and €710 million loan from bilateral and multilateral organisations to fund the deficit in the 2021 budget.
In a letter read out by Senate President, Ahmad Lawan, at Senate plenary, the president also asked the lawmakers to approve grant components of $125 million, attributing the need to borrow more funds to meet “emerging needs” of some “critical projects.”
However, this has not gone down well with Nigerians; they are kicking against the new loan, saying it is one too many.
This recent loan request is coming barely two months after the National Assembly approved the president’s earlier request to borrow $8.3 billion and €490 million loans contained in the initial 2018-2020 borrowing plan.
The lawmakers had said the needed funds were meant for projects geared towards realising the Nigerian Economic Sustainability Plan across key sectors, such as infrastructure, health, agriculture and food security, energy, COVID-19, among others.
The ease with which Nigeria is fast accumulating debt, especially since the advent of the Buhari administration has left many in shock. His reasons for the loans actually look good.
According to the president, while addressing a virtual meeting with members of the Presidential Economic Advisory Council, PEAC, in Abuja in September 2020: “We have so many challenges with infrastructure. We just have to take loans to do roads, rail and power, so that investors will find us attractive and come here to put their money.’’
Nigerians are made to believe that the loans are for infrastructural development. They are told that the loans are tied to projects. However, Nigerians argue that there are no signs that the loans are being deployed to purpose except, perhaps, in the rail sector where some activities are noticeably going on. Nigeria’s road network could rank as one of the worst in the world and people continue to live in darkness, worst still paying heavily for the darkness power companies imposed on Nigerians.
By September 2020, the Debt Management Office, DMO, the government agency that coordinates the management of national debts, revealed that the country’s total public debt stock stood at $84.574 billion. But barely a year later, Nigeria is grappling with a debt overhang of over N3trillion.
Nigeria’s indebtedness is rated to be the biggest in sub-Saharan Africa.
Records show that Nigeria’s external debt remained low until the middle of the 1970s. It was $1.5 billion in 1970 and $2.5 billion in 1975. Things began spinning out of control by 1977 and stood at $7.5 billion in 1979 and subsequently $8.9 billion by 1980.
By 2005, however, the nation’s debt had ballooned to about $30 billion, mostly borrowed from the Paris Club of creditors. Under the then Chief Olusegun Obasanjo regime, Nigeria got a reprieve when Nigeria and the Paris Club announced a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria’s debt stock by $30 billion. This debt stock to Paris Club was cancelled after negotiations, which culminated in the country’s exit via a famous debt buy-back deal between 2005 and 2006, hence clearing its books of any debt.
Sadly, it was not long that Nigeria plunged into debt again such that by 2015 it had accumulated up to $63.8 billion. According to the DMO, Nigeria’s total public debt stock stood at $84.574 billion as at September 2020. It comprised the domestic and external debt stocks of the Federal Government, the 36 state governments and the Federal Capital Territory, Abuja.
As at December 2020, official data at the Debt Management Office, DMO, put Nigeria’s debt at N32.9 trillion, $86.3bn, comprising. Of this amount, 9.7% or N1.2 trillion ($3.3 billion) was owed to the Export-Import Bank of China. In all, China was being owed a hefty 80.1% of bilateral debt or $4.1 billion.
However, as at March 31, 2021, DMO again put Nigeria’s public indebtedness at $87.239bn or N33.107trn. As at this period, Nigeria owed China $3.402 billion, according to the DMO. This covers 11 loan facilities from the China Exim Bank since 2010.
Official figures show that Nigeria’s debt to China grew 136% between September 2015 and September 2020, from $1.4 billion to $3.3 billion.
As at March 2020, Nigeria had borrowed a total $3.121 billion or 11.2 per cent of the external debt stock of $27.67 billion from China.
Nigerians are worried by the nature of the loan agreements, especially as it relates to China, with regard to a sovereign guarantee clause in the agreements, which they feared might have subjugated the country’s sovereignty to the Asian giant. This prompted the House of Representatives to set up committees in May 2020 to investigate all China-Nigeria loan agreements.
According to the Minister of Transportation, Rotimi Amaechi, and the Attorney General, Abubakar Malami, the clause was inserted to assure China that the loans would be repaid otherwise; they could seek avenues, including arbitration, to resolve likely disputes, or taking over those assets that would enable them to recoup their funds.
However, Nigeria’s dependence on loans to fund even budgets is not the best option for a country with several means to shore up its revenue base.
Actually, the country’s national debt ratio to Gross Domestic Product (GDP) at 35.51 per cent is still within limit. The problem is the country’s inability to beef up its revenue base and inappropriately using much of the available revenue to service debts, which is unacceptable.
The stark reality of the president’s latest loan move is the fear that he could be collateralising Nigerians. Someone had calculated that every Nigerian is currently indebted to the tune of N155, 000. This notwithstanding, unfortunately, it does not seem that the National Assembly as presently constituted could turn the president’s request down or interrogate it very well.
We are of the view that borrowing is not actually the issue if it is done with development in mind and actually used to provide those infrastructures. Nigeria as a developing country has a lot of potentials to generate revenue and meet some of its responsibilities, not depending solely on unsustainable borrowing.
Government must creatively pursue policies that would improve revenue earnings and reduce dependence on foreign loans. It should move away from overdependence on crude, as its only source of revenue. There are several mineral deposits in Nigeria that have been neglected over the years, including gas. Now is the time to develop them.
Apart from that, government should make its touted policies on agriculture real by encouraging large-scale farming. To do this, however, government must address the insecurity that has chased farmers away from their farms and make implements available for mechanised agriculture.
It should also ensure that the loans gotten are effectively deployed to enhance economic fortunes of the citizens and state. Government must prune the cost of governance and if necessary merge or do away with some unproductive ministries as well as remove possible leakages like the corruption-ridden fuel subsidy. The seeming degradation of Nigerians as collaterals or even mortgaging the pride of Nigeria as a sovereign nation to loan sharks is most uncharitable and disappointing.
