Buhari raises Nigeria’s debt from $7.3b to $41.8 billion
By Jeph Ajobaju, Chief Copy Editor
Nigeria exited the Paris and London clubs of creditors in 2006 under Olusegun Obasanjo but the country’s debt has since jumped from $2.1 billion in 2007 to the current level of about $41.8 billion under Muhammadu Buhari.
External debt rose to $7.3 billion by 2015 under Goodluck Jonathan. Buhari increased it to $41.69 billion by 2022.
The government recently applied to draw on a $800 million loan the World Bank approved in 2021 to spend it on palliatives for about 10.2 million Nigeria most vulnerable to the impact of fuel subsidy removal.
In 1999 when democracy returned to Nigeria, its total debt was $28.04 billion. That figure dropped to $2.1 billion in 2006 on debt relief secured by Obasanjo, but went up to $7.3 billion by 2015.
Buhari has raised the figure 472.6 per cent to $41.8 billion in the past eight years.
Paris Club debt relief
Nigeria and the Paris Club announced in October 2005 a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria’s debt by $30 billion.
The deal was completed in April 2006 when Nigeria made the final payment and its books were cleared of Paris Club debt.
“The Fiscal Responsibility Bill has been designed to lock in the gains of economic reform and prevent a relapse to the past.
“The law will commit all tiers of government to a set of rules for efficient economic management in terms of standardised planning, as well as control and monitoring of public borrowing and expenditure,” The DMO wrote in 17-page presentation at the time titled, “Nigeria’s debt relief deal with the Paris Club”.
About 17 years later, Nigeria is back in the debt trap, with total foreign debt rising 1,890 per cent from $2.1 billion in 2007 when Obasanjo left office.
DMO data on external debt in 2022 lists 18 sources of debt to include:
- The International Monetary Fund (7.8 per cent)
- International Development Association (32.2 per cent)
- International Bank for Reconstruction and Development – the World Bank – (1.1 per cent)
- African Development Bank (3.8 per cent)
- African Growing Together Fund (0.04 per cent)
- African Development Fund (2.2 per cent)
- Arab Bank for Economic Development in Africa (0.01 per cent)
- European Development Fund (0.09 per cent)
- Islamic Development Bank (0.33 per cent)
- China EXIM Bank (1.02 per cent), Agence Francaise Development (1.28 per cent)
- Japan International Cooperation Development (0.15 per cent)
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CSOs alert Buhari’s reckless borrowing may cost Nigeria foreign assets
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World Bank loan most affordable
Nearly 100 per cent of Nigeria’s revenue is ring-fenced for debt servicing and refinancing, which analysts consider a sign of distress.
World Bank Nigeria Country Director Shubham Chaudhuri has argued Africa’s most populous country has no choice but to borrow to finance its 2023 budget deficit.
Chaudhuri made the point on Channels Television in reaction to the $800 million concessional loan the World Bank offered to Nigeria, per reporting by The Guardian.
Nigerians and other stakeholders have intensely criticised the $800 million loan amid rising debt.
However, Chaudhuri explained Nigeria has no alternative but to borrow to finance its N10.7 trillion budget deficit, whether or not fuel subsidy is removed.
He said the $800 million World Bank loan is the most affordable for Nigeria now compared to loans from the domestic market, Eurobond or others.
His words: “Everyone needs to be clear on the fact that whether Nigeria receives the $800 million World Bank loan or not, 2023 Nigeria’s budget is already having a projected deficit of N10.7 trillion, that is if the fuel subsidies are removed by June; but if not, the deficit would be N12 trillion or more.
“The deficits have to be financed; the fact is that Nigeria would be taking more debts to finance its budget deficits. Unfortunately, with revenue still being low as they are, Nigeria has no choice.
“The question is how do you finance the deficits? It will reach N10.7 trillion or N12 trillion; our financing is available but other choices exist.
“You can borrow from the Eurobond market, the domestic market or the Central Bank (which had happened in the past with the ways and means of financing); all of those sources are quite expensive.”
Dairy Hills Chief Executive Officer Kelvin Emmanuel described Buhari’s administration as the most reckless in the history of Nigeria, which will leave Nigerians in a bad place shortly.
“Buhari’s administration will be remembered as the most fiscally reckless with an absolute disregard for the Fiscal Responsibility Act (FRA). Every sensible tenet that was placed as a safeguard by the constitutional framers to prevent the economy from stumbling has been violated.,” Emmanuel said.
“Nigeria’s debt per capita has gone from N17,800 to N368,421. Nigerians will bear the brunt of high inflation and high cost of capital from monetary tightening.”
Energy expert Henry Adigun added the current debt level will sink the economy because Buhari broke all known financial rules, including the FRA which should guide against reckless borrowing.
“I can’t understand how we got here; Nigeria broke every fiscal rule. CBN ignored all the mechanisms in place to avoid this. The Debt Management Office was also complicit,” Adigun lamented.
“Nigeria has a revenue problem. You can’t spend over 90 per cent of your earnings on servicing debt. The economy will crash.”
He implored Abuja to eliminate subsidies and stop supporting the budget through CBN Ways and Means (W&M).
“Cut wastage and tighten up your procurement systems. Implement the Orosanye report. Free up capital for the government by allowing the private sector to fund businesses. Government has no business in business. We are heading towards a cliff.”
Adigun said there are sectors the government has no business participating in, insisting the business of government is funding social services.
“The private sector has plenty of funds. The current exchange rate manipulation will not aid investment. A country that adopts multiple exchange rates already disincentivises investment, it does not matter whether it is foreign or local.
“Investors go to where the business environment is friendly and free of manipulation.”
