By Jeph Ajobaju, Chief Copy Editor
Nigeria’s debt rose by N20.8 trillion to N32.92 trillion between July 2015 and December 2020, and to N33.11 trillion in the first quarter of 2021 (Q1 2021), according to Debt Management Office (DMO) data.
Servicing the debt cost N1.8 trillion between January and May this year, creating concern for financial experts who note that national debt has ballooned under the watch of Muhammadu Buhari with little to show for it.
Buhari became President on May 29, 2015 and has since served six years, with two years left in his second and final term – if does not cling to power beyond 2023 by hook or by crook.
Nigeria’s total debt by June 30, 2015 was N12.12 trillion; it rose to N32.92 trillion by December 31, 2020. Meaning the debt rose by N20.8 trillion or 171.61 per cent in five and a half years.
Of the total N32.92 trillion debt, the federal government piled up N26.91 trillion (81.74 per cent), the 36 states and the Federal Capital Territory Administration (FCTA) have N6.01 trillion (18.26 per cent).
According to PUNCH, quoting the DMO data, domestic debt accounts for N20.21 trillion (61.39 per cent), external debt N12.71 trillion (38.61 per cent).
Debt servicing
Between June 2015 and December 2020, a sum of N10.26 trillion was spent servicing the debt; domestic debt costing N8.53 trillion and foreign N1.72 trillion.
DMO data shows the cost of servicing local debt as
· July to December 2015 (N489.59 billion)
· 2016 (N1.23 trillion)
· 2017 (N1.48 trillion)
· 2018 (N1.8 trillion)
· 2019 (N1.69 trillion)
· 2020 (N1.85 trillion)
Servicing external debt
· 2016 ($353.09 million
· 2017 ($464.05 million)
· 2018 ($1.47 billion)
· 2019 ($1.33 billion)
· 2020 ($1.56 billion)
Because of the high cost of servicing local debt, Aso Rock secured more external loans to put the ratio at 60 per cent local debt and 40 per cent foreign.
In May this year, the Senate approved another $6.18 (N2.3 trillion) Buhari requested to borrow from external sources to finance the 2021 budget deficit of N5.6 trillion.
Buhari said the loan would fund infrastructural projects in transportation, health, and education among others.
The DMO disclosed recently that more than $5.83 billion approved foreign loans are yet to be disbursed by lenders. Their disbursement will only increase Nigeria’s debt.
A larger percentage of the loans would come from the International Development Association (IDA), a member of World Bank Group. Outstanding loans from the group amounted to $3.27 billion by December 2020.
Another $1.25 billion loan is expected from the Export-Import Bank of China, Nigeria’s largest creditor apart from multilateral agencies.
Other major sources of undisbursed loans include Agence Francaise de Development (500 million Euros) and the European Development Fund ($425 million).
Recipient agencies and projects
The DMO listed the projects and agencies that would benefit from the undisbursed funds to include
· Nigerian Supply of Rolling Stock and Depot Equipment for Abuja Light Rail Project
· Nigerian Greater Abuja Water Supply Project
· Nigerian National Information Communication Technology Infrastructure Backbone Phase II Project
· Four Airport Terminals Expansion Incremental Project
· Nigerian Four Airport Terminals Expansion Ancillary Project
· Nigerian 40 Parboiled Rice Processing Plants Project
· Say No to Famine of Nigeria
· Nigeria Transmission Expansion Project Phase I
· Nigeria Transmission Expansion Project Phase I
· Second Africa Higher Education Centers of Excellence for Development Impact Project
· Rural Access and Agricultural Marketing Project
· Northern Corridor Power Transmission Project
· Enhancing Vocational Training Delivery for the Power Sector in Nigeria
Abuja hinges borrowings on low debt-to-Gross Domestic Product (GDP) ratio and the need to build infrastructure, but experts say a better measure is debt servicing to revenue ratio which has been above 50 per cent.
DMO Director General Patience Oniha told PUNCH that crashed revenue and COVID-19 also fueled the quest to borrow more.
She said the rate of borrowing had started to come down until coronavirus forced Nigeria, like other nations, to increase borrowing to lift the economy.
“The higher level of borrowing from 2015 due to the revenue crash occasioned by crude oil started trending downwards thereafter.
“Unfortunately, COVID-19 reversed that trend. That became necessary and many countries including the UK and USA also embarked on new borrowing,” Oniha said.
“It is not correct to say that the economic team is not concerned about how the debt will be repaid. You know that a Debt Sustainability Analysis and Medium Term Debt Strategy are done.”
Although experts say borrowing is necessary to boost an economy, especially in recession, but many Nigerians fear borrowings lack transparency and are spent on recurrent expenditure.
Borrowing not transparent, purpose not known
Akpan Ekpo, a professor of economics and public policy at the University of Uyo, said there is nothing wrong in borrowing if used to finance infrastructure.
“The problem with our borrowing is that it is not transparent enough, we don’t know what they are borrowing for.
“They tell us they are borrowing for infrastructure but they keep borrowing. It is a problem. They need to be more transparent so we would know what they are borrowing for,” he told PUNCH.
“I suspect most of the borrowing is used to pay expenses, which is wrong. The debt-GDP ratio allows them to borrow, but the point is that GDP does not pay debt. Revenue pays debt.
“If you look at the debt revenue ratio, we are in trouble, so the borrowing is becoming disturbing especially the debt servicing. It is worrisome. Because we are servicing debt without utilising the principal.
“I think they need to be more transparent, they need to look at more domestic resource mobilisation, and avoid more borrowing.
“When you borrow today, you are trying to make the future generation pay for it. And if we are not seeing the impact in terms of infrastructure then it becomes worrisome.
“If they are going to finance infrastructure, say, constant power supply for 24 hours, and factories open and people are employed, we have reduced unemployment, because unemployment is linked to poverty rate.
“Recently the president sent a letter to the Senate for some more borrowing. I think the Senate needs to have a public debate whether we should continue borrowing.”
Prince Bassey, another financial analyst, reiterated that constant borrowing hinders infrastructural development.
“Based on the budget, debt servicing has taken a huge chunk of the total expenditure. This means that infrastructural development will suffer. The money we are supposed to use for infrastructural development will be used to service debt.
“We have not created the right infrastructure to service debt. Therefore, money from other sectors of the economy is taken to service debt. This has a ripple effect on the economy in general,” Bassey told PUNCH.