Against the backdrop of the high cost of debt servicing in both 2017 and 2018 proposed budget, JUSTUS NDUWUGWE, is worried by the tendency to create unsustainable debts at the Federal and sub-national levels, when the government should block all the revenue leakages and depend less on borrowed funds.
Despite assurances to the contrary, Nigeria seems to be marching, once again, towards debt overhang. Though it is generally agreed that there is nothing basically wrong with borrowing or accumulation of debts but when a country devotes about 40 per cent of its income to pay debts, something is definitely wrong with such country.
Flash back to 2006 when the former Minister of Finance, Dr. Ngozi Okonjo-Iweala led a negotiating team, under former President Olusegun Obasanjo regime, to exit Nigeria from the Paris and London clubs of creditors. It was celebrated as a milestone within and beyond the country. Indeed, “as a result of the Paris Club debt deal and the exit from the London Club debts, the external debt stock dropped to USD3,544.54million in 2006 from USD5.94billion in 2004 and stood at USD3,654.21million as at December 31, 2007”, see ‘Milestones in Public Debt Management in Nigeria: A Journalist’s Perspective (2015).
Barely eleven years down the line, the external debt stock, (Federal and states), has risen to USD15.35billion as at 30th September, 2017, according to the figures released by the Debt Management Office in its website. More worrisome is that much of the growth in the quantum of the debts occurred in the present regime of President Muhammad Buhari.
According to data from the National Bureau of Statistics (NBS), the stock of federal and states debt as at June 30, 2017 reflected that the country’s foreign and domestic debts stood at USD15.05 billion and N14.06 trillion.
The statistics further showed that USD9.67billion came from multilateral debt, USD218.25million was bilateral and USD5.15billion was from the Exim Bank of China credited to the Federal Government.
Further, NBS said that total Federal debt accounted for 74 per cent of the nation’s total foreign debt while all states and the Federal Capital Territory (FCT) accounted for the remaining 26 per cent. Again, total Federal debt accounted for 78.66 per cent of the country’s total domestic debt while all states and the Federal Capital Territory (FCT) accounted for the 21.34 per cent balance.
Specifically, the report revealed that domestic debts of the 36 states and the FCT have continued to grow since 2015 under the present administration, rising from N2.503trillion in 2015 to N2.959trillion in 2016 before hitting N3.001trillion in 2017. And in view of the flurry of activities in the debt sector between June and December, the figures are bound to increase substantially at the end of the year.
Unfortunately, the huge borrowing spree is continuing as President Muhammad Buhari has laid before the National Assembly, a deficit budget proposal of N8.612trillion for 2018, 16 per cent increase over the level of 2017 budget of 7.8trillion.
Highpoints of the breakdown showed that out of the N8.612trillion, N3.494trillion is for recurrent expenditure, N2.428trillion is for capital expenditure; N2.014trillion is for debt service; N456billion is for statutory transfers and N220billion is for sinking fund to retire maturing bond to local contractors.
Of much concern to the public is the quantum of the amount earmarked for debt servicing, N2.014trillion which is a very large chunk of the entire budget. In actual fact, the N220billion also projected for the retirement of maturing bond to local contractors is also for the repayment of debt, in a layman’s language.
Indeed, the situation could get worse as the President said that his government plans “to finance the deficit partly by new borrowings estimated at N1.699trillion. Fifty per cent of this borrowing will be sourced externally, whilst the balance will be sourced domestically. The balance of the deficit of N306billion is to be financed from proceeds of privatization of some non-oil assets by the Bureau of Public Enterprise (BPE)”. What this means is that N1.699trillion would be added to the amount of debt hanging on the country by 2018 and ipso facto, it is likely that the level of debt servicing will also increase depending on the date of maturity of loans from external and domestic sources, from 2018 and beyond.
While some Nigerians think the 2018 budget proposal is realizable and achievable, many others feel that the objectives of the budget would not be realized due to the huge financing gaps that are noticeable in the budget. Recently, leading a debate on the general principles of the 2018 budget estimates, Senator Dino Melaye queried why the Executive shouldn’t have come forward with realizable budget in the face of dwindling revenues to implement the budget. According to the Senator, “we should cut our budget according to our cloth (revenue)”, instead of bringing forward budgets that we do not have the wherewithal to implement.
To the Senate President, Olusola Saraki, if Nigeria could ‘plug routes of revenue leakages”, there was no need for the ever-ending borrowings that have bedeviled the country. Making his speech earlier before the presentation of the 2018 Appropriation bill before the joint session, the Senate President said the country was losing about N40trillion revenue annually from Ministries, Departments and Agencies of the federal government. “This sector alone accounts for over N40trillion in valuation, of which less than N400billion is remitted as revenue to the Consolidated Federation Account. This is not acceptable. We need to vigorously address this area”, he further advised.
With increasing dependence on non-oil sources, Saraki’s advice should be seriously considered instead of going cap in hand every now and then, seeking for loans that place some lien on the unborn generation. A popular saying has it that no amount of money is enough for the prodigal. The country should do well to look inwards and not always depending on borrowed funds to solve its infrastructural and other needs.
The way forward is to intensify effort towards revenue mobilization. Along this line, the Minister of Finance, Kemi Adeosun in an article published widely on Monday, November 6, 2017 titled, “All change, Nigeria is not an oil economy”, aptly captured the thinking of Nigerians on the need to borrow less but engage in aggressive tax drive. She said, among others, “…revenue mobilisation is potentially the master key to unlocking Nigeria’s huge growth potential by funding its ailing infrastructure including roads, power and rail”.
If this nation mops up the N40trillion revenues locked up by the MDAs as revealed by the Senate President, realises the potential tax income from the largely untaxed 70million Nigerians plus the monies recovered from corruption cases, then this country does not need to borrow as much as it is doing at present. Borrowed money is sweet to spend but bitter to repay. Nigeria must not go back to the days of excruciating debt overhang.
Justus Nduwugwe writes from factsandfiguresnews@yahoo.com
