New Telegraph

Debts: Buhari’s exit leaves Nigeria with massive burden

In a space of almost eight years, Nigeria’s total debt accelerated from $63.81 billion in 2015 under President Muhammadu Buhari’s watch to N46.25 trillion on December 31, 2022. ABDULWAHAB ISA reports on the implication to the country, especially as Buhari is scheduled to leave office on May 29

President Muhammadu Buhari’s administration will end on the 29th May, 2023. One of the arrays of parting gifts the administration will bequeath to Nigeria is humongous debt stock. For an administration that inherited a debt stock of $63.81 billion at its inception in 2015, the nation’s basket of debt witnessed rapid increase from $63.81 billion in 2015 to N46.25 trillion as at 31st December 2022. The debt accumulations were recorded within twoterm tenures of the administration, a development that leaves tongues wagging. On many occasions, Nigerians and analysts were dismayed and had expressed concern about the government’s penchant for unrestrained borrowing. The administration wasn’t short of giving reasons for borrowing. President Buhari on many occasions defended his government’ borrowing spree as a necessary step that will lead to providing infrastructure that would expand opportunities for the growth of Nigeria. He reiterated this stance in his last Independence Day address to the country on October 1, 2022. “The Federal Government is already expanding port operations to ensure that they provide opportunities for the growth of the Nigerian economy. We have also continued to accelerate our infrastructure development through serviceable and transparent borrowing, improved capital inflow and increased revenue generation by expanding the tax bases and prudent management of investment proceeds in the Sovereign Wealth Fund. “To further open up our communities to economic activities, we have continued to boost our railway infrastructure with the completion of a good number of critical railways and at the same time rehabilitating as well as upgrading obsolete equipment”, he said. In addition, Buhari noted that no village in the country was left behind in the regime’s Social Investment Programmes such as NPower, trader-Moni, market moni, etc. “I am pleased to inform my fellow citizens that besides our emphasis on infrastructural development with its attendant opportunities for job creation, employment generation and subsequent poverty reduction, our focused intervention directly to Nigerians through the National Social Investment Programme is also yielding benefits”. The rationale for borrowing espoused by the president and similarly echoed by his cabinet ministers and aides do not get easy buy-in of most Nigerians. Finance Experts, Analysts, who spoke against the borrowing spree, said the current administration has choked the economy with more debts compared to any administration before it, with little or nothing to show for it.

Spiraling debt stock under Buhari watch:

In line with Debt Monanagment Office (DMO) periodic updating of debt statistics, the agency recently released Nigeria’s total debt( comprising domestic and external debt owed by the Federal Government and 36 states and Federal Capital Territory) as at 31st December 2022. Nigeria’s total public debt stock owed by the Federal Government and sub governments – the 36 states and the Federal Capital Territory (FCT) stood at N46.25 trillion as at December 31,2022. The amount was higher than N39.56 trillion (US95.77 billion) figure as of December 31, 2021. In terms of composition, the domestic debt stock component was N27.55 trillion (USD 61.42) while total external stock was N18.70 trillion (USD 41.69 billion.) The Federal Government’s domestic debt stock rose by N13.37trillion or 151.33 per cent between December 31, 2015 and the end of last year. An analysis of Federal Government’s domestic debt profile indicates that the debt stock, which stood at N8.87trillion as at the end of December 2015, maintained an upwards trend under the outgoing President Muhammadu Buhari-led administration, which came into office on May 29, 2015, to hit N22.21 trillion as of December 31, 2022. The Federal Government’s domestic debt stock rose from N8.84trillion as of December 31, 2015 to N11.06 trillion at the end of 2016 and further increased to N12.59 trillion and N12.77 trillion at the end of 2017 and 2018 respectively. Also, the debt rose to N14.27 trillion and N16.02 trillion at the end of 2019 and 2020 respectively, before surging to its highest levels of N19.24trillion(2021) and N22.21 trillion(2022) under the administration. Further analysis of the government’s domestic debt stock by instruments as of December 31, 2022, showed that at N16.42 trillion, FGN Bonds accounted for 73.94per cent of the total debt stock, followed by Nigerian Treasury Bills, which at N4.42trillion accounted for 19.91 per cent of the debt stock. The Federal Government’s Sukuk accounted for 3.34per cent(N745.76billion) of the total domestic debt stock while promissory notes at N530.03 billion and Federal Government Savings Bond at N27.51billion accounted for 2.39 per cent and 0.12 per cent respectively of the debt stock. The agency defended the rising debt profile. It premised it on Nigeria’s nature of budget deficit which had to be financed through borrowing. Particularly, DMO explained that the rise of debt from N39.56 trillion in 2021 to N44.6 trillion was chiefly due to new borrowings by the FGN and sub-national governments, primarily to fund budget deficits and execute projects. In addition, DMO rationalized issuance of Promissory Notes by the FGN to settle some liabilities as contributing to growth in the debt stock. As a cushioning measure, DMO banked on current efforts by the government to expand revenue sources and buoy income streams as a strategy to mitigate debt impacts. It said: “On-going efforts by the government to increase revenues from oil and non-oil sources through initiatives such as the finance Acts and the strategic revenue mobilization initiatives are expected to support debt sustainability”. It noted that, “the current debt stock to Gross Domestic Product (GDP) ratio for December 31, 2022, was 22.47 per cent and indicates a slight increase from the figure for December 31, 2021 . “The ratio of 23.20 per cent is within the 40 per cent limit self-imposed by Nigeria, the 55 per cent limit recommended by the World Bank/International Monetary Fund, and, the 70 per cent limit recommended by the Economic Community of West African States.” Nigeria’s burgeoning debt stock attracted public outcry in early January this year, when it was projected it could climb up to N77 trillion by May if the Federal Government’ borrowings from the Central Bank of Nigeria (CBN) via the ways and means, in addition to other borrowings were added to it. CBN’s ways and means borrowing to the government which stood at N22.72 trillion forms part of the bulk of portion of debt stock expected to shuts up total debt stock to projected N77 trillion by May this year. Ways and Means debt represents already spent money, which the Federal Government had approached National Assembly’s endorsement for securitization.

Experts’ divergent view:

Issues have been raised about sustainability of Nigeria’s current debt stock. Experts shared divergent perspectives. Speaking to Sunday Telegraph, Mr. Idakolo Gabreil Gbolade, Economist and Financial Adviser and Wealth Management Expert, said debt stock was sustainable. “The debt stock is sustainable if we do not add more debt to it in 2023. We have to look inwards to fund our budget going forward and engage the private sector and our development partners to take over certain aspects of the budget. We need to eradicate waste and corruption and free up funds for servicing the existing debt burden. The government should also diversify dependence on oil and encourage exploration of natural resources. We should embrace the technological age and get our fair share of the market by encouraging Nigerian tech innovators. We should improve on our ease of doing business and canvass for new investment from both local and foreign investors.” Analysts at the research department of Coronation Merchant Bank said that the country’s debt -to-GDP ratio of 23.2 per cent is, “relatively low” when compared with economies such as Egypt, Ghana, Kenya and South Africa. In a report released yesterday, the analysts said: “On a y/y basis, total public debt increased by 16.9 per cent. “We note that as at end-December ’22, public debt is equivalent to 23.2 per cent of 2022 nominal GDP. “This is relatively low when compared with other African emerging economies such as Egypt (87%), Ghana (82%), Kenya (68%), and South Africa (67%). “It is also in line with the DMO’s debt management target of a debt-to- GDP ratio of 40 per cent for the period 2020- 2023 and below the limit of 55 per cent set by the World Bank for countries within Nigeria’s peer group.” “Overall, the external debt stock accounted for 40.3 per cent of total public debt. Within the external debt, multilateral lenders such as the World Bank, IMF, AfDB and bilateral lenders like China, Germany, Japan, India, and France collectively accounted for 60.7 per cent of external debt, commercial loans (i.e. Eurobonds and Diaspora) represent 37.4 per cent of external debt while others accounted for two per cent of external debt stock. “As at end-December ’22, the FGN has spent N3.8 trillion on debt servicing (N2.6trn on domestic and N1.2 trillion on external). It is worth highlighting that the debt-service-to-revenue ratio stood at 81 per cent at end-November ’22. Revenue underperformance continues to adversely impact the fiscal landscape,” analysts said.

IMF, World Bank adopt new measure on debt

The Bretton Wood institutions- The World Bank and the International Monetary Fund(IMF) have resolved to enthrone fresh mechanisms to tackling rising debt problems amongst developing nations, including Nigeria. The duo made this position known at the 2023 World Bank/ IMF spring meeting currently ongoing at Washington DC, United States of America, USA. . Both the IMF and global bank say they will present concrete proposals to address some of the biggest restructuring roadblocks for heavily debt ridden nations. World Bank President, David Malpass, revealed the proposal. “With the debt crisis growing larger, we must approach the meetings in the week ahead with resolve and urgency,” Malpass said. “Now is the time for all parties to turn words into action. “Right now, the debt overhang is just paralyzing some of the countries,” Malpass said. More than half of the world’s low-income countries are at high risk of debt distress or already in it, and several have defaulted. Also speaking at a joint seminar on “The way Forward: Building Resilient” yesterday at ongoing the IMF/World Bank Spring meeting in Washington DC, Malpass, and the Managing Director of IMF, Kristalina Georgieva, said part of the discussion was with the low-income countries

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