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By Kate Halim
Nigeria may be heading towards another debt crisis. This is because barely two decades after her Paris debt cancellation, the country’s sovereign debt has reached an all-time high with over $103 billion (N42.8 trillion) debt as of March 2022.
It is against this backdrop that the Civil Society Legislative Advocacy Centre (CISLAC), with support from Christian Aid (CA), on Friday, December 2, 2022, organised a one-day forum on media presentation of research regarding the role of private creditors in Nigeria’s debt crisis and the self-inflicted financial burden the country is currently grappling with.
At the forum, stakeholders agreed that government should desist from borrowing and maintain a realistic debt management model to help improve debt sustainability as well as embark on capital expenditure that will promote GDP and also maintain realistic debt management model to help improve debt sustainability and fiscal prudence.
The research was a product of a 12-month project that centres on revealing and challenging the role of private creditors in hindering people’s recoveries to enhance the urgency with which the international community must address sovereign debt crises. The research was commissioned to fully highlight the Nigerian context and dimensions of the indebtedness to private creditors for policy options and deliberate efforts to end it.
According to the organisers of the forum, the ultimate outcome of the project is to contribute to international financial architecture and establish a macroeconomic environment which will enable the fulfilment of human rights needs as well as the undertaking of climate action in economies that centre on care.
While shedding light on the importance of international finance, the organisers noted that the history and roles of international finance can be traced to 1944 when the two Bretton Woods institutions namely the World Bank International Bank for Reconstruction and Development, (IBRD) and the International Monetary Fund (IMF) were created to respond to the global need for development finance.
The research revealed that with no provision for the private sector, over the years, these financial institutions became a godfather to governments of various nations in lending money. As a nation grows, its financial needs increase and in the absence of resources, it will look for a way to sustain its economy.
According to the research, the accountability and transparency advocacy group’s main cry is predicated on the fact that despite the loans being taken, successive administrations in Africa’s most populous country have been unable to meet their obligations either for national economic growth and development or a better life for the people who are supposed to be the major reason for the government.
In his opening remarks, Executive Director, Civil Society Legislative Advocacy Centre, (CISLAC), Auwal Musa Rafsanjani who spoke virtually via zoom, said the research became necessary because Nigerians could not allow the government to plunge the citizens into perpetual poverty because they lack the initiative to invest in human capital.
He added that the advocacy journey by CISLAC with support from Christian Aid became imperative because it will help prevent future generations from the burden of debt.
Rafsanjani said: “We find today’s engagement crucial to amplifying the interests of the 130 million multi-dimensionally poor Nigerians, as well as a huge percentage of those who sit above the poverty line, whose lives, livelihoods and future are being impacted by lack of adequate investment in critical social sectors and the growing threats of climate change.”
He noted that Nigeria is presently in a debt crisis with a fiscal deficit well above the statutory threshold of 3 per cent, an increasingly unsustainable debt profile, and a rising cost of debt servicing worsened by the rising interest rates and socio-economic investments sacrificed at that expense. He added that government patronage of private creditors is plunging Nigeria into a debt burden and impeding physical development.
Speaking further, Rafsanjani said the research was commissioned to fully highlight the Nigerian context and dimensions of the indebtedness to private creditors for policy options and deliberate efforts to end it.
He added that the reason for the research includes creating a policy round table on the modality for setting a debt limit as a veritable mechanism for providing the parameter for checks and control of the debt stockpile of all the tiers of Government and ultimately, to avert a national public debt crisis of bankruptcy proportions.
“As we share the findings of this research, we hope that it contributes to protecting the interests of present and future generations by spurring present and incoming governments in Nigeria to take urgent actions to salvage the country from the current and impending economic throes,” Rafsanjani said.
While making his presentation on the evidence-based research on the role of private debtors in Nigeria’s debt crisis, research consultant, Botti Isaac outlined the challenges of patronising private creditors and revealed why despite the gains of accessibility, Nigeria has remained at the same point unable to meet its obligations or move forward.
Isaac noted that the major issue is the legal framework guiding borrowing in the country which does not support doing so outside of the multi-lateral and bi-lateral arrangements. He, however, faulted the requirements for accessing loans by private creditors, which makes it easy for the government to take more loans. He insisted that civil society groups and media organizations should continue to talk about the impact of excessive borrowing until the right thing is done to save Nigeria from the burden of such debts.
“We need to be concerned because most of the loans and their private creditors are not known to the public. The law is that loans can be taken under multilateral and bilateral arrangements and at conventional interest rates. It is difficult to understand the terms and conditions under which these loans were obtained, which is not the case if they were taken from the sources approved within the legal framework for borrowing.”
Isaac added that the parameter for checks and control of the debt stockpile is important for all the tiers of government so that the country can avert a national public debt crisis and move forward.
He noted that the loans problem was not caused by only the Federal Government, even as he pointed fingers at the 36 states of the federation.
In his remarks, the head of Programmes, Christian Aid Nigeria, Victor Arokoyo re-echoed what Rafsanjani earlier said. He noted that the government can’t be borrowing constantly because their actions will have negative impacts on generations to come. He added that the Christian Aid Nigeria supports CISLAC on the research so that Nigerians can know where the government is borrowing money from and what the money is being used for.
Arokoyo said that the 75-year-old international faith-based development and humanitarian organization will be 20 years old in Nigeria next month, and he believes that poverty is not a product of nature but a result of systemic manipulation of the economic system skewed against some people to make them poor.
His words: “In line with our economic justice, social and political justice, we are part of the tax justice and political platform in Nigeria. One of the things we do is the campaign for private creditors to begin to see the need not to give Nigeria loans again because their loans are costing the government the ability not to respond to public services.”
“For example, you can see from the graph that was shown by the research consultant, that borrowed money is spent on servicing debts compared to what is spent on education and health. And when it comes to our debt and revenue ratio, you can see that we are now borrowing to pay debts. I borrow Mr A’s money, I can no longer pay. I will go and borrow from B to pay A. For instance, foreign exchange viability has been contributing to the rise in foreign exchange debt, thus, higher debt burden results from constant depreciation of the local currency.”
Arokoyo noted that there is no wisdom in constantly borrowing money because there are other sources from which the Nigerian government can get money to address her financial challenges. “The law prescribes the kind of loan you can take and where you can take it from. What the government is doing now is going outside that legal framework to collect loans anywhere money is available and putting the country in serious debt,” he said.
Arokoyo explained further: “So, we are interested in widening the knowledge of citizens about this issue and possibly for them to demand from the government on the need to look inwards to sustain the economy rather than engaging in excessive external borrowing. Let us have some period of pains now so that we can have gains tomorrow, rather than have gains now and our children will have pains tomorrow.”
At end of the media dialogue, recommendations were made that the government must embark on ventures that will boost its revenue generation, reduce reliance on borrowing from the international capital market, and maintain a realistic debt management model to help improve debt sustainability and fiscal prudence.
Stakeholders also agreed that the government must improve public borrowing transparency and accountability, strengthen the foreign exchange policy to reduce the impact of volatility on loan repayment, and strengthen legislative review approval processes to ensure that only concessional loans are approved.
It was also agreed that government needs to establish an independent committee that comprises representatives of civil society organisations, Office of the Auditor-General, the Ministry of Finance and the DMO to carry out an independent review of all future loan requests with the view to determining their variability and importance.
CISLAC head, Rafsanjani ended the discussion by calling on the National Assembly to save the country from imminent economic collapse. He also called on the three tiers of government to develop realistic economic policies that will curb financial recklessness and help reduce poverty in the country.
