June 6, 2023

Buhari’s huge parting debt profile (3), By Eric Teniola

oil subsidy

From last week, the piece continues the narrative on the rising debt stock of the Federal and state governments and the unfortunate implication of this to the country’s economic development

Borrowing makes our lives unfortunate, but we are the ones who borrow, so we face problems simultaneously. To borrow means to take and use something that belongs to somebody else, and return it to them at a later time. Does this action lead to unpleasurable consequences? Borrowing is a doomed cause.

It ends with its beginning, like a closed circle and never lets you go away. It grabs you with its tentacles, until it completely tears you to pieces, like a fierce beast, and then leaves you to the vultures and jackals. People borrow things, and money especially, when they are in need. But this need is caused in most of the cases by the person’s laziness and foolishness and mismanagement too.

If the individual is ambitious and clever enough, he will never sink in the mud puddle of need. That is if he is smart enough to limit himself and determine his needs to his abilities. Even if you borrow with a good will in mind, what guarantees that you will be able to return what had been lent to you? Then you will have to borrow again, and again, and…except.

My late mother, Madam Juliana Adekolarin Teniola, cautioned me that I should not make borrowing a habit as I will suffer for it in the end. She also instructed me that self-discipline will help me achieve greatness and that people who tend to borrow often are usually slow in settling debts. But as I grew older, I realised that debt is a major development issue and there can never be any growth without incurring some level of debt. One needs to borrow from commercial houses to make for progress and profit in any enterprise. When too much debt is obtained it definitely becomes a burden.

Debt has a significant effect on global poverty. For example, borrowed money accrues interest which adds to debt and can lead to impoverished lands suffering because massive interest payments drain funds that are needed for things like infrastructure investment. Compound interest over a matter of decades can soon render a serviceable debt unsustainable.

Addressing the media on December 30, 2019, my friend, the Minister of Information, Mr Lai Mohammed, said Nigeria’s debt servicing to revenue ratio has been higher than desirable. The minister put the country’s current debt profile at $83.8 billion and dismissed reports that the country’s external debt was $81 billion. According to him, the entire debt profile comprises $27.163 billion external and $56.720 billion domestic debt. He said the debt figure represented the cumulative borrowings by successive government and that the total public debt stock in 2015 was $63.80 billion, comprising $10.31 billion of external debt and $53.49 billion domestic debt.”

Presenting his budget on October 8 last year to the National Assembly, President Muhammadu Buhari said: “We have provisioned N3.12 trillion for this in 2021, representing an increase of N445.57 billion from N2.68 trillion in 2020. A total of N2.183 trillion has been set aside to service domestic debts while N940.89 billion has been provided for foreign debt service. N220 billion is provided for transfers to the Sinking Fund to pay off maturing bonds issued to local contractors and creditors”.

Like every Nigerian, I am worried by the rising Nigeria’s debt profile because debt is the principal cause of poverty, leading to human suffering and misery and hampering economic development. This is not what we should handover to our children and grandchildren. 

I have to make reference to the speech by then President Olusegun Obasanjo when he addressed the National Assembly on debt on July 26, 2005. 

He said on that day that: “I am very pleased at this opportunity to brief you today on issues relating to our nation’s debt relief, the contours and struggle for debt relief, the terms of the relief we were granted by the Paris Club, and the opportunities that this opens up for our dear country Nigeria. Let me start by thanking you, members of the National Assembly for your understanding, encouragement and support during the struggle for debt relief.

It is the courage and vision that you exhibited in standing firm with the Executive that made it possible for us to carry out the arduous negotiations that resulted in this unprecedented relief for Nigeria. Let me say at this point that this pattern of cooperation should not end here. We have more national and international challenges before us and only cooperation, commitment, mutual respect can ensure victory for our ideas, initiatives and actions.

In this brief, in respect of debt relief, I will speak on the inherited debt overhang, the impact it had on our effort to grow and develop the economy, the struggle for debt relief, the results of this struggle, the benefits to our country and people, and the future. Of course, not all Nigerians know the truth, the importance or impact of debt relief, and the opportunities that it provides for our country”.

Now we are in a dilemma over our debt profile. I am sure we are not expecting another debt relief again. 

The potential problems of government borrowing is that it will lead to higher debt interest payment and also lead to increase rate in taxes, thereby leading to inflationary pressures. The prediction in 2005 was that paying the debt will free up cash that will push towards capital expenditure and bring the desire economic boom. Instead what we have now is that we spend more on recurrent expenditure and limited capital expenditure. We are back in full cycle. Poverty and conflict are closely interconnected. 

Now we are being told that Nigeria total debt profile will hit N33 trillion this year. The rate at which we are going, in terms of our debt profile, may lead to Nigeria being put up for sale.

Very sad indeed.