Statistics on Nigeria’s rising debt profile raise fresh concerns over the direction of the economy on President Muhammadu Buhari’s watch. With the total national debt stock at N23.7tn by March 31 this year and new borrowings underway, the mismatch between infrastructure, productivity and employment on one hand and debt on the other hand, is frightening. Unless Buhari applies the brakes and takes practical measures to grow the economy and create jobs, Nigeria may be headed for another recession and new debt peonage.
A report that about N1tn was added to the national debt stock in the first few months of this year is depressing enough. Debt Management Office data reveals that national debt rose from N12.6tn in December 2015 to N22.70tn by March end, this year. This increase of N10.1tn in less than three years suggests that we are headed for a new debt trap. According to the DMO, of the total debt, N6.74tn or $22.07bn is external debt while domestic debt stands at $52.20bn or N15.96tn. In United States dollar terms, the total debt as of March 31 was $74.27bn.
In a belated move to curb the borrowing binge, the Federal Government, through the DMO, has instructed deposit money banks not to grant fresh credit, either directly or from the bond market, to the state governments, except with the written approval of the Minister of Finance. Bogged down by debts and dwindling revenues, the states rely on credit to fund their often unrealistic budgets and pay salaries. Of the domestic debts, the states and the Federal Capital Territory jointly owe $11.05bn or N3.35tn.
But while debt statistics are rising, other figures are moving in the opposite direction. About nine million jobs have been lost in the past three years, according to the National Bureau of Statistics. Between January 2016 and September 2017, NBS said 7.95 million Nigerians had lost their jobs with the number of newly unemployed rising from 8.03 million persons by late 2015 to 15.99 million by the third quarter of 2017. A new report by the Brookings Institution says 87 million Nigerians now live in “extreme poverty.” For the African Development Bank, 80 per cent of Nigerians are actually living below the United Nations poverty threshold of $2 per day.
Therefore, how do we justify our borrowing with poverty and joblessness stalking the land or infrastructure in tatters? The answer lies in the profligacy of the previous governments and the cluelessness of Buhari. Inheriting a battered economy laid low by the free-for-all looting under the preceding Goodluck Jonathan administration and crashing oil prices, Buhari needed to come with ingenious initiatives to reduce the debt dependence that had already started before him, direct energy into production and open up the economy to local and foreign direct investment. He has failed on all counts.
Refusing to embark on privatisation and liberalisation initiatives, and hit by an oil price crash and depleted buffers, his administration has, like his predecessor, had to rely on domestic and foreign borrowings to fund the budget and critical infrastructure. Budget and National Planning Minister, Udoma Udo Udoma, has said that N1.6tn would be borrowed to finance the 2018 budget, made up of N793bn from the domestic market and N849bn in foreign borrowings. Revenue shortfalls and the addition of N508bn by a cavalier National Assembly raises the possibility of higher borrowings. Some N1.3tn was the planned borrowing in 2017.
Sadly, most of the borrowings finance consumption, such as salaries, overheads and debt servicing, rather than infrastructure. This template can only deliver job losses, poverty and insecurity. To change the narrative, Buhari should first go for low hanging fruits, such as immediate privatisation of the four loss-making refineries, Ajaokuta Steel Company; concession the airports and seaports and, most importantly, dismantle the Nigerian National Petroleum Corporation, whose control over the country’s major revenue source has enabled it to hold the economy to ransom. Liberalising the railway sector by repealing the Nigerian Railway Corporation Act of 1955 and working with the states will open the sector to FDI and create jobs.
The government should discontinue the self-defeating recourse to loans for building major rail links when it can, by policy and the necessary political will, attract private investors to do so.
Inheriting a civil war-ravaged country, President Paul Kagame of Rwanda has restructured the economy that grew by an average eight per cent per year between 2001 and 2014. He has channelled aid, loans and revenues into infrastructure and opened the economy to investment. East European economies that emerged after the fall of communism also took bold initiatives to change the fundamental structure of their economies: they compete for investments and invest in infrastructure, skills and social services while private capital thrives.
Nigeria’s federal and state governments do not place emphasis on productivity: ours is a “sharing” economy. All policies should be directed at creating jobs to reduce the over 40 per cent unemployment and underemployment rate among our youths. FDI is critical: rather than go to China for loans for rail, road and power projects, why not simply allow the private sector to move in as India is doing?
Dealing more effectively with corruption, blocking revenue leakages, reducing the size and cost of governance, as well as radical overhaul of revenue-generating agencies are steps that need to be taken to reduce borrowing and boost the economy.
Nigeria exited a three decade-old external debt trap in 2005; Buhari should not drive us into a new one.
