- IMF’s observations noted, but we have to spend our way out of the problem
TRUST the International Monetary Fund (IMF) to show more than a passing interest when the subject matter is Nigeria’s burgeoning debt. At the just-concluded World Bank/IMF meeting in Washington D.C, it was time again for another chieftain of the fund – this time, its assistant director, fiscal affairs department, Cathy Pattillo, to counsel Nigeria: it is alright to borrow more, but such funds should be used for infrastructure and social spending. The country, she added, should “broaden her tax base. What is key”, she said, “is what countries such as Nigeria are doing with those borrowed funds.”
Such routine lectures on fiscal priorities by the Bretton Woods institution has certainly become norm. In November 2018, the fund’s senior resident representative and mission chief for Nigeria, African Department, Amine Mati, had echoed similar sentiment: although Nigeria’s debt to Gross Domestic Product remained low at between 20 and 25 per cent, the country actually spent a high proportion of its revenue on debt servicing as a result of low revenue generation. The debt servicing to revenue ratio, he noted then, was more than 50 per cent when the rate for the sub-Saharan Africa was about 10 per cent.
Said he: “The interest rate has gone up to where they used to be around the year 2000 before the debt relief. The adjustment has relied on spending compression rather than revenues mobilisation. Meeting the Sustainable Development Goals will require stronger growth and more financing.”
IMF’s concerns are no doubt, noteworthy. In many respects, they approximate the concerns of the ordinary Nigerian who has seen the nation’s debt balloon in the last five years of the Buhari administration. In this, it does not really matter how the government or the IMF chooses to frame it – whether it is called revenue or debt problem – the underlying issues are the trajectory, the burden of repayment and their overall impact of service delivery and what this forebodes for the country’s future.
As this newspaper is wont to say, not only is the memory of the nation’s experience in the hands of the cartel of London and Paris Club creditors still fresh, it has remained a cruel reminder of an era when the nation’s leaders plunged the country into debts for projects that never went beyond the drawing board.
Unfortunately, the concerns – albeit legitimate– would appear as, increasingly misplaced. If anything, they have tended to obscure the larger issue of how the country burdened by low revenue in the midst of unprecedented infrastructure gap is expected to finance development. Only in March, the Director-General of the Bureau of Public Enterprises (BPE), Alex Okoh, told a visiting World Bank delegation that the country would require a minimum of $3 trillion investment to bridge the infrastructure gap in the next 30 years. According to him, the country would require an average of $100 billion per annum for the next six years to begin with, in order to meet that target. Even in the unlikelihood of the government being expected to shoulder the burden alone, can a country whose entire 2019 Federal Government budget is only $29 billion (the figure proposed for Y2020 is $33.8 billion) – a good chunk of which is also debt – realistically foreclose the debt option, either on account of being dealt a bad card in the past, or on account of current revenue not matching up? Without an aggressive investment in infrastructure, how would the locked-in potential of the economy be unleashed?
The IMF has done well to alert on the import of the numbers; the same with its call on the government to ramp up the revenue drive. To these we add the need for the government to work harder to drain the swamp at the federal bureaucracy. What we find unhelpful is the IMF’s penchant to be unduly prescriptive on matters that are purely Nigeria’s domestic affairs.
Like most Nigerians, IMF ought to be more interested in assisting Nigeria and Nigerians to get real value for every dollar of the debts. Few Nigerians would disagree that most of the loans being taken for such critical infrastructure like the railway and power are precisely what the country needs to catalyse the economy at this time.
