- Even if inevitable in the circumstances, we still must call for caution in view of our experience
After exiting the debtor cartel a little more than a decade ago, Nigerians would ordinarily be apprehensive about any attempt to take them down that route again. Little wonder members of the Senate Committee on Foreign and Local Debts at a meeting with the Director-General, Debt Management Office (DMO), Abraham Nwankwo, last week, voiced their concerns about the nation’s debt trajectory.
The DMO boss had told the members that the nation’s total debt, which stood atN12.12 trillion as at the end of June 2015, had risen to N17.36 trillion as at December 2016. He gave the breakdown of the debt stock as follows: external – N3.48trillion ($11.41 billion); domestic – N13.88trillion ($45.98billion). Of these, the 36 states and the Federal Capital Territory account for about 32.45 per cent, leaving the Federal Government with the balance of 67.55 per cent. He blamed the ballooning debt on the prevailing economic challenges.
Without question, the realities of the current economic predicament are such that make the debt option somewhat inevitable. First is the shock occasioned by the collapse of the nation’s sole export – crude oil – and with it the revelation that the reforms of the past years, ostensibly designed to diversify the economic base, have come to naught. Then of course is the poor tax base, a factor exacerbated by the shrinking economic activities, which means very little can be done in the short term to ameliorate the revenue situation. Add to this the cold reality of yawning infrastructure deficit said to require a staggering $2 trillion in spending over the next three decades to address; the situation leaves little to imagination as to where the funds will have to come from.
Yet, as pragmatic as the debt option appears, it isn’t exactly that the senators as indeed citizens’ anxiety are entirely groundless. Clearly, if Nigerians shudder at the rising debt profile in the last one year, the real prospect of contracting another cycle of jumbo loans as being contemplated by the Federal Government cannot but stoke serious concerns.
Never mind the Federal Government’s oft-touted justification about the relatively low debt to GDP ratio, the disproportionately huge revenue to the debt service ratio, even at the current levels, ought to be troubling enough. In the 2016 budget for instance, a whopping N1.48 trillion was allocated to debt servicing out of the N6.06trillion budget. This year, the amount proposed for debt servicing isN1.66trillion ($5.44 billion) out of the N7.29 trillion ($23.97 billion) 2017 budget.
As for the argument about the low debt-GDP ratio justifying more debts, we must say that the argument is neither here nor there. The Islamic Development Bank (IDB) representative in Nigeria, Abdallah Mohammed Kiliaki, actually put the issue in better perspective when he noted sometime in March, last year, that: “when you look at the debt-GDP ratio of Nigeria, it is very low. It is 17 per cent compared to Italy and other countries which is about 150 per cent while that of the United States is about 100 per cent.
“But there is a caveat… when you look at the amount, the revenue, to debt servicing ratio, the amount of money that the government is collecting, the revenue of the government vis-a-vis the ratio to the total debt, I think Nigeria pays about 75 to 80 per cent of its revenue to service debt”. That of course is the crux of the matter.
That however is not all that there is to the debt matter. Other issues no less troubling include the sometimes steep interests on the loans; the real possibility of the loans being either diverted or mismanaged; the extant public service culture of crass indiscipline bordering on sabotage and such other dysfunctions associated with the bureaucracy – all of which ensure that the citizens do not in the end get the value for the huge sums taken.
Much as we do not seek to dissuade the Federal Government from shopping for critical funds to jumpstart the economy, we can only urge it to pay attention to these issues that have not only proven to be the bane of previous efforts but have left citizens frustrated and angry.
