VIEWPOINT IS ON NIGERIA’S MOUNTING DEBT PROFILE AND DEEPENING ECONOMIC CONCERNS. IT IS WRITTEN BY FEMI ADEBISI, A MEDIA CONSULTANT
Nigeria, Africa’s largest economy, is grappling with a mounting debt burden and a range of economic concerns that threaten its long-term stability and development. Despite efforts to secure loans for critical sectors and productive projects, the implications of over-borrowing, coupled with unabated corruption, raise serious questions about the country’s economic future.
Furthermore, the National Assembly in May 2023, approved a bill to raise the government’s borrowing from the Central Bank of Nigeria (CBN) with the hope of securing more loans from the apex bank.
Nigeria’s foreign debt as at June 2023, was put at $43.2 billion, while domestic debt is put at N54.1 trillion, bringing public debt to N113.4 trillion.
President Bola Tinubu’s administration has wasted no time in seeking external financing, with $1.95 billion already borrowed from the World Bank and the International Monetary Fund (IMF) within three months.
While investment in critical sectors is vital for economic growth, over-borrowing can have dire consequences if not managed effectively. Having mortgaged the nation’s crude oil and liquified natural gas escrow accounts, Nigeria is now borrowing from the future to pay the debt of the past, now leaving the present vulnerable.
However, the injection of borrowed funds into productive sectors may provide immediate gains, such as infrastructure development and social programs, the opportunity costs associated with over-borrowing must be carefully considered.
Excessive debt servicing diverts a significant portion of government revenue from essential sectors like healthcare, education, and social welfare, hindering long-term economic progress.
For example, Nigeria spent 96.3% of its revenue on debt servicing in 2022/23 while about 103% of revenue is projected for debt servicing in 2024.
Nigeria’s persistent struggle with corruption exacerbates the implications of over-borrowing. Official corruption pervades all sectors of the economy and government, hampering the effective utilization of borrowed funds and impeding the country’s development.
Misappropriation of funds, embezzlement, and bribery divert resources from critical projects, further widening the gap between promised improvements and actual progress.
Nigeria, despite being a major global oil producer, remains heavily reliant on fuel imports due to inadequate local refining capacity. Also, dependency on fuel importation places a strain on the country’s foreign exchange reserves, contributing to a trade deficit. The trade imbalance further weakens the economy, making it vulnerable to external shocks and hindering efforts to attract foreign investment. Consequently, to balance or stabilize the Naira against the USD, Nigeria needs to borrow.
As a matter of urgent public importance, the need to explore alternatives to over-reliance on external borrowing cannot be over-emphasized. By examining the potential of local production, addressing tax evasion by rich companies, and combating corruption, Nigeria can mitigate the need for excessive indebtedness and safeguard its economic future.
Nigeria’s decision to spend $155 million on importing smart meters, despite having the capacity to produce them locally, raises concerns about missed opportunities for domestic manufacturing. Encouraging local production not only reduces dependence on imports but also stimulates economic growth, creates job opportunities, and enables technology transfer. By prioritizing self-sufficiency and import substitution, Nigeria can retain valuable foreign exchange and bolster its industrial sector.
Nigeria can also look inward and privatize most of its failing and moribund assets like the refineries, old NITEL, Ajaokuta Steel Company, Nigerian Iron Ore Mining Company, Nigerian Airways, for effectiveness, sustainability, probity, and immediate revenue generation in such a manner that the nation can pay all its debts and channel its energy into other productive endeavours such as power, agriculture, solid minerals, marine economy, tourism and other productive sectors for economic stability.
One significant issue exacerbating Nigeria’s debt burden is the failure of rich Nigerian companies, including international oil companies and multinationals, to fulfill their tax obligations. These companies owe billions in taxes, often compromising their payments. It is disconcerting that the previous administration waived over 7 trillion naira in taxes for such entities. By enforcing tax compliance and ensuring that companies pay their fair share, Nigeria can significantly increase its revenue base and reduce the need for excessive borrowing.
The magnitude of corruption in Nigeria is staggering, with billions of dollars being siphoned off by individuals in high places. The claim by human rights activist Femi Falana SAN that approximately $200 billion was stolen through oil subsidy scams highlights the scale of the problem. Recovering these illicit funds, is crucial to reclaiming Nigeria’s patrimony. Implementing robust anti-corruption measures, prosecuting those involved in graft, and establishing transparent governance structures are essential steps towards curbing corruption and preserving national resources.
Overall, addressing Nigeria’s power crisis is crucial for economic stability and reducing the need for borrowing. If electricity is made readily available and affordable to the people and businesses, it will stimulate economic growth, attract investment, and generate additional revenue through increased productivity. Coupled with fiscal discipline and efficient budget management, Nigeria’s revenue can be maximized to meet essential expenditures without resorting to excessive borrowing.
In conclusion, It is imperative for Nigeria to explore these alternatives to safeguard its economic future and prevent the nation from being mortgaged through excessive indebtedness.
