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Rising national debt: The danger signals

“History does not repeat itself; man does.”Barbara Tuchmann, Harvard University Historian.

“Nigeria’s debt rises to N24.95tn in two years.”

Once again, the educated and discerning Nigerians in what had been described by Governor El-Rufai of Kaduna State as “the developing South” of Nigeria are almost alone in raising the alarm regarding rapidly rising debt. This is a national issue that will define the fate of our nation for years to come. With the exception of a few patriotic individuals from what Rufai called “the backward North”, the matter of the national debt rising from N19.16tn in March 2017 to N24.95tn in March 2019, representing an increase of 30.22 per cent in just twenty-four months can only be alarming to the educated and those who can think deeply. It can certainly not be expected to disturb those with low educational qualifications – irrespective of status in society. 

Debt, Nigeria

Even without adding a single naira of debt, the future of Nigeria has been mortgaged for more than ten years by governments today. Unfortunately, this year’s budget has provisions for adding N2.3tn to the debt burden. Nations which for several years increase their debt ten times faster than their annual growth and revenue eventually end up being bankrupt. Then harsher measures have to be taken which result in violent social and political upheavals. Nigeria might be inching closer to the edge of the precipice than we realise.

“It requires wisdom to understand wisdom; the music is nothing if the audience is deaf.” Walter Lippmann, 1899-1974, Dean of American Journalists in his day.


It will be futile to assume that the current expression of grave concern will jolt the masses of Nigerians, particularly our northern fellow countrymen who constitute the majority and their leaders. As the lawyers say, “You can’t give what you don’t have.”   To some extent, this report is not even addressed to those who need it most and who can directly act on it. It is an epistle to the educated elite irrespective of ethnicity, religion, political affiliation and even income status in Nigeria today. The message is basically short and simple and will be delivered upfront without the usual jargons of economics in order that it can be understood by even people with low education – if they choose to think. It is a message for the Federal and State Governments and for the lawmakers at each level of government. It is also a message for Nigerians to be prepared for the worst henceforth. The message revolves around two basic principles which will be stated first.

First, no nation or state or economic entity has ever borrowed its way out of economic problems – poverty, poor infrastructure, low revenue generation etc. All the nations and sub-national entities have escaped poverty and improved the economic and social welfare of their people by borrowing and investing at higher rates of return in those variables – education, infrastructure, technology and good governance – which will generate more wealth than was invested in the first instance. Right now, the FG and most, if not all the state governments, borrowing funds, are not investing in projects that will yield returns. Instead, they are dissipating the loans on recurrent expenditure and unsustainable projects and abandoned projects. In short, the FG and states are wasting the loans. Two examples will follow. They are not exhaustive of the examples but they indicate how our present and future are being progressively ruined on account of atrocious economic leadership.


“FG releases N460b for capital budget”, News Report, October 11, 2018.

“FG yet to fund capital projects 43 days after budget assent”, News Report, July 11, 2019.

In 2016, the FG budgeted N500b for the Social Investment Programme, SIP. The same year, N2.3bn was provided for Capital Expenditure. By October of that year, only N770b had been released for capital expenditure and N90b for SIP. Yet, the FG borrowed over N2tn. SIP, which had the largest vote that year, was supposed to stimulate consumption and induce production and growth. But, under-funding the government’s own legacy programme deprived the country of all the possibilities for rapid productivity improvement. Capital votes were not released until July on account of delay in getting the budget passed. Revenue estimates by Ministries, Departments and Agencies proved to be unrealistic. Fuel subsidy continued to be paid. Obviously, a great percentage of the borrowed funds went into recurrent expenditures. The FG was adopting a “borrow and spend” instead of a “borrow and invest policy”. Nigeria ended the year in a recession and the debt ceiling was raised once again. Was any lesson learnt? Clearly not; as the news reports for 2018 and 2019 above have demonstrated.

Also read: Budget 2019 dead before arrival

“Principles of economics don’t respect anybody”.   US Economist, Nobel Prize Winner.

Somebody, in the topmost hierarchy of the FG, operates under the impression that the whole world and the Nigerian economy is waiting for the appointment of Ministers who will implement the 2019 Budget. Meanwhile, it is known that Ministries cannot operate at full strength without Ministers. They, at least, have to present requests for major capital expenditures. What is ignored, when appointments are made, is the fact that cash-backed capital investments made in January helping to increase productivity for the entire year and provide multiplier effects several times the sum invested throughout the year. The same quantum of investment made in November affects the Gross Domestic Product, GDP, for only one month that year. Time is always a variable in any investment decision. That is why no rapidly developing nation would allow its government to delay important appointments because the quality of appointees also determines whether or not financial markets will respond positively or negatively.

A situation in which there is no 2019 capital appropriations by July constitutes a repetition of the 2016 mistakes which got us into a recession and paved the way for our emergence as the Poverty Capital of the World. The problems we have with increasing debt are thus compounded.

On the one hand, the nation spends a higher percentage of each succeeding year on debt-servicing – which is unproductive – and also less on current expenditure; which depresses growth further. Together they push the nation into more debt financing. Our steady and continuous slide into deeper poverty would have been assured if those are the only problems associated with increasing debt burden.

With external debt accounting for about 32 per cent and domestic debt 68 per cent of total debt outstanding, it is obvious that the FG and states have been collecting the lion’s share of available loans in the financial markets. They have collectively driven up interest rates which banks charge operators in the private sector thereby discouraging investments. Again, it is one of the verdicts of economic history that no economy can grow rapidly if its manufacturers have to borrow at double-digit interest rates. Governments in Nigeria, with the FG leading, are steadily killing the private sector, increasing unemployment and creating more people living in extreme poverty each and every day.


It might sound like another doomsday prediction, but, no forecasts made in the past have failed to come true. Right now, two annual budgets are in jeopardy and the loans to be taken to execute them are almost certain to make Nigeria’s economic situation worse. The 2019 Budget is already doomed for several reasons, but three will be sufficient to make the point.

Power supply problems will remain intractable for the next two years at least. On May 29, 2015, President Buhari announced that it was intolerable for Nigeria with a population of 180 million to continue to generate 4000MW per day. Four years after, not only is the nation experiencing lower supply per day, the frequency of national grid collapse has increased. The nation now generates less power in 2019 than in 2015. That has called into question the investments made since 2015. Only recently, a Federal Court ruled that the FG must publish the names of contractors who collected funds and abandoned power projects. Some of the loans taken in the last four years are tied up in those projects. The sooner the FG realises that it is almost impossible to grow the economy at six or seven per cent per annum with power supply stuck at under 4000MW, the sooner we will remove the greatest obstacle to growth – after clueless leadership.

It is a repetition of the corrupt practices which led Nigeria into the debt trap from which we were delivered by rising oil prices and Dr Ngozi Okonjo-Iweala in 2004. Then, as now, most contractors, well-connected to those in power abandoned projects for which Nigerians continued to pay without enjoying any of the benefits promised by governments. We are travelling down a familiar road – despite the vaunted war on corruption. Governments are still borrowing only to hand the funds to contractors who will abscond with them.

“Nigeria’s oil output hits the highest level since Jan 2015.” News report. July 11, 2019.

The good news was that for the first time since 2015, the country produced 1.97 million barrels per day. Now, let’s face the bad news because that is what has torpedoed the 2019 Budget. As some readers would recollect, this year’s budget was premised on production and exporting of 2.3 million barrels per day. Nigeria had not reached anywhere near that level since January. Even now, with 1.97 million barrels, we have a negative variance of 15 per cent each day. It was higher for the first six months. Consequently, crude oil revenue, on which we rely to pay the debts and other bills, will be in short supply for the entire year. Nothing, short of another major war in the Middle East, will prevent another serious revenue shortfall this year. Already, the monthly allocation of revenue in Abuja has demonstrated the decline in revenue for the three tiers of government. Debt servicing will consume more of the actual income in 2019. Capital expenditure will not only be lower this year; it will be delayed as in 2016. GDP growth will be less than 2 per cent and Nigerians will sink deeper into poverty.

Unfortunately, the problems associated with budget implementation in 2019 are already impacting the 2020 budget negatively. The Medium Term Expenditure Framework, MTEF, a three-year rolling plan which must precede next year’s budget and should have been started by now, is likely to be delayed. So will the 2020 Budget. Long term investors will have no documents as a guide to their investment decisions in Nigeria. Foreign Direct Investment, FDI, the flow will slow down to a trickle – only unavoidable investments will be made. The sources for repayment of our debts will continue to dry up – making repayment more difficult and very painful.


Agriculture had in the last ten years grown faster than the economy in general. Thus, in 2016, despite a recession, the sector still grew by over four per cent. The story has changed significantly in 2019. For the first time in Nigerian history, millions of Nigeria farmers, especially women, have abandoned the farms on account of herdsmen invasion, bandits’ forceful confiscation of their harvests and kidnappers. Virtually, every northern state is experiencing massive flight from farms and the consequences are already becoming apparent. Early farm productivity is drastically reduced. Fishing in the Lake Chad basin had virtually come to a halt.

With the farm sector in a crisis, the growth of GDP is seriously threatened. Another recession will result in massive capital flight and drive the country deeper into the debt trap – despite the assurances from the Debt Management Office, DMO. At any rate, the DMO has no choice but to issue those guarantees. To do otherwise is to provoke a major crisis of confidence in the economy.


Apparently, the FG and state governments cannot restrain themselves from piling up debts at unsustainable rates. However, the fault does not lie with the Executive branch alone. The lawmakers at the Federal and State levels have also abandoned their constitutional responsibilities by not checking the appetites of their governments for borrowing. Invariably, the FG and states are left with huge debts without the means of repayment other than more borrowing. But, elected officials and well-enlightened members of society must understand that the nation’s capacity for borrowing is not infinitely elastic.

Lenders also watch the debt to GDP ratio. Nigeria’s ratio has been climbing steeply in the last four years. Nervous lenders fearing a debt default in the future will demand higher interest rates to be paid as a hedge against possible debt crisis. That will put additional pressure on the country by increasing the ratio. A spiral is already underway which might terminate in default if crude oil prices dive below $60 per barrel for more than three months.

There are two options available to governments – especially the FG. The first is to increase the internally generated revenue of MDAs. The second is to reduce costs. To increase revenue generated by MDAs, the FG should focus on the parastatals capable of generating income but are failing to do so on account of inept Chief Executive Officers and massive corruption.

The Nigeria Ports Authority is one of the worst in this regard. A separate article will be needed to highlight the over hundred ways Nigeria loses billions of dollars from the operations of the NPA. That organisation alone might be able to increase its dollar revenue sufficiently to reduce our borrowing by 25 per cent.

NNPC is another. The largest cash-cow of the nation is also its biggest source of revenue leakage for the same reasons as NPA. Recent appointments provide no assurances that things will be different. False claims for fuel subsidy will apparently continue to be paid and the FG will continue to borrow to pay for liabilities associated with an organisation whose counterparts worldwide provide net profits from operations on which those nations grow their economies.

The NNPC is joined by the Federal Inland Revenue Service and the Central Bank as units not doing enough to increase revenue generation by allowing a few well-connected Nigerians to sit on funds which would help grow the economy if released from their grasps. The FIRS promised, but failed to publish the names of wealthy tax delinquents – people who refuse to pay the billions owed to the nation; but who enjoy its best facilities. Some fly private jets.

The Central Bank draws Nigeria back in two ways. The first is by allowing less than two per cent of the population to be responsible for over 50% of Non-Performing Loans in our banks. These sacred cows are making it difficult for the Small and Medium Scale Enterprises, which are the biggest employers of labour worldwide, to thrive. If they do, tax collection will be enhanced and there will be less need to borrow to run the country.

“It was beautiful and simple; as all truly great swindles are.”

  1. Henry, 1862-1910. VANGUARD BOOK OF QUOTATIONS, VBQ p 239.

The CBN also has an “elephant in the room”; it is called Assets Management Corporation of Nigeria, AMCON. In reality, AMCON is a misnomer. The organisation was established by CBN in 2010 to buy the toxic loans which some criminal bank Managing Directors and Board members accumulated. The banks were then refinanced with public funds — again 190 million Nigeria’s money. It was expected that the banks will gradually liquidate the loans provided to recapitalise them after the failure of bank consolidation introduced by Professor Charles Soludo. Over N5tn is involved or more than double the borrowing planned for this year. The banks have refused to pay and the FG and CBN don’t care if they do. They both prefer to make fellow Nigerians pay a high price for the crimes and follies of a few. AMCON is stuck with assets it cannot touch. That is not management; that is a national fraud. It was a grand swindle. The CBN Governor who approved it knew it would never work.

From sources at AMCON, some banks and the FIRS, it would appear that some of the same names are on the list of tax dodgers, bank dead beats and AMCON loan delinquents. Nigeria is held to ransom by less than 500 people flying private jets while the FG borrows to keep the country afloat.

As long as we allow a situation which will be considered intolerable in any developing country to continue, we will never stop piling up debts and endangering our future.


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