More debts are being acquired with uncertain results
The nation’s total indebtedness to foreign and local creditors now stands at N19.16 trillion, the Debt Management Office (DMO) has said. This is N1.8tn increase from the N17.36tn recorded at the end of December 2016. As of March 31, 2015, the country’s total debt stood at N12.06tn. This means the debt level increased by N7.1tn in two years. Mrs Kemi Adeosun, Minister of Finance, said recently the problem was not that our debt is too high, but that our revenue is too low. The World Bank recently expressed similar concern over the debt servicing to revenue ratio, saying that reduced earnings might render the country’s debt unsustainable. A total of N1.84tn was provided in the 2017 budget for debt servicing.
We are worried by the frequency of borrowing by the federal and state governments as many analysts have continued to sound a note of caution that the country may be heading for another debt trap if restraint is not exercised. The current perception of the populace is that government, at all levels, has failed to plug the leakages and wastes, which over the years have become institutionalised in their states. If they can do that, there may be no need for some of the debts they keep piling up for future generations to settle.
We must recall that in 2005, Nigeria successfully negotiated a complicated debt write-off deal of about $18 billion after a cash payment of approximately $12 billion to free the nation from the Paris Club debts of over $30 billion, most of which were accumulated interests and charges. A chunk of these loans were secured in the 1980s to fund what turned out to be white elephant projects and the profligacy of the various administrations at that time.
With about $3 billion dollars spent annually just on debt servicing at the time, the argument to exit the club was plausible. The idea was that the funds that would be saved from annual debt servicing would be channelled to productive sectors of the economy and to tackle some of the critical sectors that encompassed the Millennium Development Goals. But 12 years down the line, we are engrossed in another national debate on the appropriateness of treading the debt path.
We are even more worried by the debts being accumulated by the states. Ordinarily, if the aim was to help many of them bridge the gap between what they receive from the federation account and their developmental needs in the areas of infrastructure, health, education, power and transportation, it would have been a laudable idea. However, it is one thing to raise these funds but another thing to ensure accountability and its judicious application. Without the requisite oversight by their respective state legislature, a large chunk of these funds could not be accounted for. While some of the new governors inherited states that are heavily indebted on account of debts accumulated from the capital market by their predecessors, they have also spiked the debts through additional borrowing.
The indices of poverty everywhere make it difficult for us to understand the choices being made by government officials at all levels and the recklessness that drives some of the projects on which the loans are expended. Many of them are out-rightly bizarre in conception and clearly irresponsible in terms of the funds expended on them. More worrying is that these debts being piled up for future generations of Nigerians are expended on projects that bring little or no returns. Clearly, many of these debts are not being taken to cushion the plight of the people but rather as a conduit for all manner of economic mischief.
