By Jeph Ajobaju, Chief Copy Editor
Nigeria spent N1.8 trillion on debt servicing in the first five months of this year, 98 per cent of revenue, as total loans rose to $87.24 billion in the first quarter (Q1 2021) from $86.39 billion in Q4 2020.
Under Muhammadu Buhari, Nigeria’s debt had jumped by N20.8 trillion to N32.92 trillion between June 2015 and December 2020, and to N33.11 trillion in Q1 2021, all figures released by the Debt Management Office (DMO).
Buhari waging economic war against Nigerians
Buhari is waging an economic war against Nigerians with several financial instruments, including a 7.5 Value Added Tax (VAT) on nearly all items that has more than doubled cooking gas price in the past eight months.
Both the World Bank and the African Development Bank (AfDB) have expressed concern that Nigeria and other African countries run the risk of defaulting on loan repayments.
Buhari is taxing Nigerians to death to service or repay loans taken by him, most of which get wasted or government officials steal through fictitious or inflated real contracts, or steal directly by dipping their hands in the till.
And he does not prosecute the thieves, some of whom are in his cabinet.
Buhari’s negligence, as well as direct and indirect taxation, have been stoking up every week – if not every day – since 2020 the prices of food, housing, transportation, health care, education, and all of the other basic human necessities.
Last month, the Socio-Economic Rights and Accountability Project (SERAP) filed a lawsuit against him for failing to probe N106 billion officially declared missing from 149 ministries, departments and agencies (MDAs).
SERAP said in the suit filed at the Federal High Court in Abuja is that Buhari has failed to prosecute those responsible for the fraud and recover the missing public funds to reduce the pressure of borrowing more money.
The suit was filed after confirmation by the Office of the federal Auditor General in its 2018 annual audited report that N105,662,350,077.46 of public funds are missing, misappropriated or unaccounted for across 149 MDAs, reported by Premium Times.
Public relations charm fails
In reaction to mounting criticism, Buhari last week sent out Finance Minister Zainab Ahmed to convince Nigerians why he must continue to take loans to enslave them.
“We are borrowing sensibly, we are also borrowing to invest in critical infrastructure like power, water, roads and rails which are investments that are required to enhance business productivity in the country today,” Ahmed said.
She disclosed that plans are afoot to obtain an additional N5.6 trillion loan.
But analysts and economists told Vanguard that Nigeria’s revenue earning capacity cannot carry the debt burden. Below are their views:
Muda Yusuf (former Lagos Chamber of Commerce and Industry (LCCI) Director General)
“The current debt challenge is about sustainability. A situation where about 80 per cent of actual revenue is used to service debt is not sustainable.
“We need a comprehensive review of the debt management framework. This would require a close scrutiny of government expenditure and revenue optimisation options.
“Of course, there is merit in borrowing to fund infrastructure, but it is also a problem if our actual revenue can hardly cover our recurrent expenditure. The situation calls for major expenditure reforms especially around the cost of governance.
“Policy and regulatory reforms are also imperative to boost investors’ confidence, accelerate growth and impact positively on revenue and job creation.”
Uche Uwaleke (finance professor at Nasarawa State University, Lafia and Association of Capital Market Academics of Nigeria (ACMAN) president)
“Borrowing for infrastructure is not a bad idea. No doubt, there’s been a noticeable improvement in transport infrastructure, especially railways.
“The challenge is that government revenues have not measured up and so the burden of debt servicing has continued to mount crowding out development funds in the process.
“Faced with this challenging situation, the government is advised to engage the private sector more in the provision of physical infrastructure while deploying scarce resources effectively to human capital development.”
David Adonri (Highcap Securities Managing Director)
“Through its reckless external borrowing, the federal government has already forced Nigeria into foreign debt trap. We are already neck-deep in a financial mess, judging from the debt service ratio which is over 90 per cent.
“We cannot rule out sovereign default in due course if new foreign loans are not taken to meet repayment obligations.
“External borrowing to develop infrastructure is unwise. No economy that is building to last does that. Well managed economies issue domestic debt to finance infrastructure development.
“Foreign investors can invest in such debt in local currency and will be paid back in domestic currency. By this, government will not be saddled with foreign debt obligations.
“Government is also approaching the infrastructure development programme wrongly.
“The effort ought to start with the development of the engineering infrastructure (technical education, metallurgical industry, electric power industry, chemical industry and energy industry) that will give the economy, the heavy industrial base which will domestically generate secondary infrastructure (roads, rail, ports, schools and hospitals).
“With emphasis on secondary infrastructure, in absence of primary infrastructure, the economy cannot be domesticated. It will still remain import-dependent; a malaise they are wrongly trying to cure.
“Finally, through appropriate public policies, the private sector can develop infrastructure and hence assume the attendant liabilities. Other than debt, other financing options like Investment Trust Funds can be used to finance infrastructure.”
Ahmed says insecurity slows down agric sector
Ahmed has also explained that the economy would have grown above 5.0 per cent in Q2 2021 but insecurity slowed down agriculture and reflected on the economy.
“The 2021 second quarter growth reflects better economic performance compared to the same quarter last year. In the same quarter last year, we had a negative growth of -6.10 per cent. It is also better than the first quarter of 2021,” she said.
“There are a number of bottlenecks within the system, including insecurity, which have negatively affected the sector. Also, the industrial sector slowed down to -1.3 per cent.
“Overall positive GDP [Gross Domestic Product] figures show that business and commercial activities are fully returning to pre-pandemic levels as restrictions in movement, business activities, as well as domestic and international travel have been relaxed.
“When these estimates are considered along with declining inflation rate which slowed down from 18.17 per cent at the end of Q1 to 17.75 per cent at the end of Q2 and as at July, stands at 17.38 per cent.
“It is clear that the economic recovery is gradually picking up steam. With favourable international economic conditions expected as economic activities and normalcy returns across major economies.
“And as local conditions continue to improve to allow business activities, the Nigerian economy is expected to maintain a steady path to more inclusive growth.”