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Nigeria’s public debts have risen to N38.005trillion (about $92.62billion) as at the third quarter (Q3) of 2021. According to the Debt Management Office (DMO), it is estimated to reach an all-time high of N40trillion at the end of the year. The N38trillion is 100 percent rise of the total debt inherited by the present administration from the immediate past government of N18.89 trillion in 2015. Of the N38trillion, N2.54trillion was incurred three months, from June 30 to September 30, 2021.
According to the debt agency, the total debt comprises of total external and domestic debts of the Federal Government, the 36 states and the Federal Capital Territory (FCT). The N2.54trillion borrowed in three months, when compared to the corresponding figure of N35.465trillion at the end of Q2 2021, DMO stated, arose largely from the $4billion Eurobonds issued by the government in September 2021. This means that Nigeria’s public debts increased Quarter on Quarter(QoQ). This is dangerous for meaningful economic planning.
The N38trillion debt excludes fresh external borrowings of $5.8billion and $10 million grant approved last week by the House of Representatives as part of the proposed 2018-2020 External Borrowing Rolling Plan No.3. The approval followed the adoption of the report of the House Committee on Aids, Loans and Debt Management. All of this puts Nigeria on a tightrope, as the country is getting closer to exceeding the acceptable debt threshold of 56 per cent of the nation’s total GDP. Arising from this, the Organised Private Sector (OPS) has raised the alarm over the far-reaching consequences of binge borrowing.
It bears repeating that the government should borrow cautiously and spend prudently. There is also the need to invest wisely, especially in projects capable of repaying the loans, and they must have direct impact on the wellbeing of the citizens. So far, Nigerians are yet to see the full benefits of the loans taken from multilateral institutions. With Nigeria’s debt service-to-revenue ratio at 98 per cent, Nigeria’s debt can be said to be unsustainable and worrisome. While the policymakers prefer to borrow big, they seem to overlook the danger of excessive debt.
We are equally concerned about the reduction in the exchange rate of our currency against other currencies. All of that will put much pressure on the real sector of the economy. On May 18, 2021, President Muhammadu Buhari got the approval of the Senate to borrow $6.18 billion foreign loan to finance this year’s N5.6trillion budget deficit. In real terms, about 90 per cent of total earnings of government is spent on debt servicing. With a sharp decline in collectible revenue, not only is the present spate of borrowing unsustainable, the future is even at great risk.
Under the present administration, Nigeria’s public debt has increased so much, from N18.89trillion in June, 2015, to N38trillion. This represents about 300 per cent rise in over six years. The World Bank recently warned that Nigeria would face high-debt risk exposure due to failure to meet contractual debt obligations to creditors. At the current debt service-to revenue-ratio of 98 per cent, for every N1 earned, N0.98 is spent on debt servicing. Experts have expressed fear that Nigeria’s total debt stock may hit N40trillion by the end of the year. Between January and May this year, government spent N1.8trillion on debt service obligations. The figure represents 98 per cent aggregate revenue within the period, which is 44.6 percent lower than the projected revenue of N3.32trillion for the period.
Data from DMO show that Nigeria had taken loans worth $31.98 billion from the World Bank Group, International Monetary Fund (IMF), African Development Bank (AfDB) Group and other financial institutions. This is contained in the September 2020 debt stock. According to the report, Nigeria has an outstanding $11.6 billion loan to be paid to the International Development Association (IDA) and International Bank for Reconstruction and Development (IBRD).
Currently, Nigeria owes China, France, India and Germany $4.0 billion. This accounts for about 13 per cent of the nation’s external debt. According to DMO, these include $3.26 billion to the Export Import (EXIM) Bank of China, Agence Francaise Development,($502.38 million), Japan International Corporation Agency, $78.20 million, Exim Bank of India, ($37 million). .
In all, the government has not been so creative in fashioning out ideas on how to generate more revenue outside borrowing and imposition of taxes and levies. It is high time government began to explore other revenue yielding sources. The diversification efforts still lack imagination. The President should heed the call to put a moratorium on borrowing for now. We also advise the National Assembly to properly vet all future loan proposals before approval. Exploring other sources of revenue and cutting the cost of governance, rather than unbridled borrowing, is the way to go.
