A little over a decade since this country painfully exited from Paris and London Clubs debt obligations by paying a hefty $18billion to those groups, we are steadily but surely sliding back into high debt status. Deputy Secretary-General of the United Nations (UN) Amina Mohammed sounded the warning last week when she said Nigeria’s debt profile is now back to worrying levels.
Speaking at the International Monetary Fund (IMF) and the UN ‘Working Together Conversation’ on Tuesday last week, Mrs. Mohammed said rising level of debt is worrisome not only in Nigeria but in many other African countries as well. She said UN and IMF must have better conversations on the demands of a growing economy seeking ways to making growth better and inclusive.
Coming from Nigeria’s top international public servant, it is time for all to sit up and take notice. Up until 2005, Nigeria had an external debt stock of $36 billion. This debt was accumulated over many decades by successive military and civilian regimes which went on a borrowing spree even though this country earned tens of billions of dollars from crude oil exports. While Shylock international lenders coaxed us to borrow, local economic advisers egged us on by saying we need external loans to grow the economy. This went on until we became deeply indebted, had no means to pay and President Obasanjo ran around the world begging for debt relief, which never came.
In October 2005, Nigeria and the Paris Club announced a final agreement for debt relief worth $18 billion. This, plus the subsequent deal with the London Club, reduced our external debt stock to a little over $3 billion. Figures from the Debt Management Office show that it is rising again, steeply. As at June 30, 2018, Nigeria’s total debt profile according to DMO had risen to $73.21 billion or N22.38 trillion, N5.8 trillion of which is external debt.
Trouble is, our top officials still do not see the danger ahead. DMO has been saying that Nigeria is under-borrowed, meaning we should go ahead and borrow even more. Former Finance Minister Kemi Adeosun also said recently that the country’s debt level is not worrisome. We totally disagree with them. It is worrisome; even IMF said so. In April this year, IMF’s Financial Counselor and Director of the Monetary and Capital Markets Department, Tobias Adrian, said during the Global Financial Stability report presentation in Washington that rising public debts in emerging economies constitute a direct risk to financial stability.
IMF’s managing director Christine Lagarde said recently that low income countries such as ours can achieve debt stability if we are prudent in taking on new debts; focusing more on attracting foreign direct investment, and boosting tax revenues at home. We must also adhere to the rigour and transparency in borrowing and lending practices, she said. It is doubtful if any of these conditions is being achieved in Nigeria, yet officials at federal and state levels are eager to borrow more money, address immediate political problems and leave the payment to future generations. This is especially true these days of borrowing from China. Though the loan conditions often look attractive, there is a very high risk of blundering from being Western neo-colonies to a Chinese version of neo-colonialism in the decades to come. Mrs. Mohammed’s warning is very timely. We must rise up and stop our country’s dangerous slide back into debt.