issue of Nigeria’s rising debt profile has always generated concerns from
across the nation’s economic and political spectrum. For instance, recently,
some senators raised formal protest on the floor of the Chambers over the
rising debt profile as contained in the 2019 Appropriation Bill. Early this
month, the Debt Management Office (DMO) said Nigeria’s total debt as at
December 31, 2018 stood at N24.39 trillion ($79.437 billion) which represents a
year-on-year growth of 12.25 per cent.
A member of the House of Representatives, Tajudeen Yusuf, who also brought the issue of Nigeria’s debt profile up for discussion at a plenary session recently, noted that the House was concerned that aside from the rising national debt profile, there was a sharp increase in sub-national borrowing in the last three years, such that the domestic debts of state governments rose from N1.69 trillion in June 2015 to N3.4 trillion in June 2018. Also, during the launch of the Global Financial Stability Report for April, 2019 at the IMF/World Bank Spring meetings in Washington D.C, U.S, the International Monetary Fund (IMF) cautioned Nigeria and other developing countries on borrowing. The Financial Counsellor and Director of the IMF’s Monetary and Capital Markets Department, Mr Tobias Adrian, who disclosed this, also said on Nigeria’s rising debt levels, funding conditions are very favourable but that may change at some point.
Similarly, financial experts have advised the federal government to check the rising external debt profile of the country. A former president of the Association of National Accountants of Nigeria (ANAN), Dr Samuel Nzekwe, said that it would be difficult to finance capital and recurrent expenditures when using more than a quarter of revenue generated to service debt. He urged the government to be cautious in accumulating more debts as this has the ability to erode investors’ confidence. Nigeria Employers’ Consultative Association (NECA) had cause to express its concerns on the issue. It pointed out that borrowing could have been permissive given the state of the economy in 2015, but not to the high level it had turned out to be. It further said that incurring debt for purposes of development was not in question, but that the over N24.39tn debt stocks taking over 20 per cent of annual national budget to service debt should be enough source of worry. It, therefore, urged government to manage the rising debt profile, both at the states and federal levels, as this trend portend a gloomy future for the nation.
Out of the N8.9 trillion proposed national budget before the National Assembly, over N2.3 trillion has been set aside for debt servicing, a development economists said was unhealthy for national development and economic growth.
However, the federal government has repeatedly said that the country’s rising debt profile was within manageable limit. Minister of Finance, Mrs Zainab Ahmed, said Nigeria’s borrowing is still low compared to Ghana, Brazil, South Africa, Egypt and Angola. Speaking at the World Bank/IMF Spring Meetings in Washington, the minister said that at 19 per cent of Gross Domestic Product (GDP), Nigeria’s debt was still at manageable level. She said that what was allowed by our Fiscal Responsibility Act is the maximum of 25 per cent of the nation’s GDP. Compared to other countries like Ghana, Egypt, South Africa, Angola and Brazil, she said Nigeria’s is the lowest in terms of borrowing.
Some analysts have commended the federal government for choosing to borrow money at concessionary rate, which was tied to specific large-scale or medium infrastructure projects. The projects comprise roads, railways, harbours, new airport terminals and the provision of aviation aids, among others. These were believed to have stimulated economic growth and contributed to the country’s speedy economic recovery and return to growth path. The government borrowed money by issuing Euro Bond at single digit rates and the money went directly into the provision of infrastructure to support the economy and enhance the living standard of Nigerians. The Fiscal Sustainability Plan paved way for state governments to access budget support facilities and Paris Club refunds totalling over a trillion Naira.
the argument for or against borrowing could linger for a long time, this
newspaper urges the government to be careful of excessive borrowing as
Nigeria’s debt has been on a steep rise, leading to the fear that the future of
unborn generations of Nigerians are being mortgaged.
Statistics may show that the nation’s debt profile is within a manageable level for now, but servicing and paying the debt should also be considered as a major factor, especially as revenue generation from oil, Nigeria’s main source of income, is generally unstable.