New Telegraph

September 28, 2023

Outrage over Nigeria’s mounting debt profile

‘Rising indebtedness negatively impacting Nigerians’ economic and social rights’


AKEEM NAFIU writes that the recent revelation by the Debt Management Office (DMO) on Nigeria’s humongous debt portfolio has sparked outrage among lawyers. The men of the wig and gown called for restraint regarding loan request by the Executive and its subsequent approval by the Legislature


Some senior lawyers have expressed deep concerns over the rising debt profile of the country which according to the Debt Management Office (DMO) currently stood at N35.465 trillion. The lawyers while baring their minds ontheissueatthe weekendwere critical of the Buhari’s administration penchant for borrowing saying it is impossible for the country to borrow its way into prosperity. The concerns by the senior lawyers werecoming ontheheelsof adamning revelation by the Debt Management Office( DMO) of anupsurgeinthenation’s debt profileby7.75 percent, fromN32.916 trillion in December 31, 2020, to N35.465 trillion as of June 30, 2021. The revelation was made by the Director General of the Debt Management Office (DMO), Ms. Patience Oniha, during a virtual debt management presentation to the media. It came amidst a fresh request by President Muhammadu Buhari, in a letter to the National Assembly, seeking the lawmakers’ approval of $4.179 billion ($4.054billionand$125million) and£710 million external loans. In herpresentation, Oniha disclosed that Federal Government carries 83.07 per cent of the debt burden while the States andthe Federal Capital Territory (FCT) account for 16.93 percent. Giving a further breakdown, the DMO DG said domestic debt accounts for 68.40 per cent while the external component stands at 38.60 percent. According to her, the Federal Government has a debt burden of N17.632 trillion while N4.122 trillion is for states and the FCT. She stated further that of the N13.711 trillion external debt, the Federal Government only accounts for N11.828 trillion while the States and FCT make up the balance of N1.883 trillion.


Buhari’s loan request


PresidentMuhammaduBuharihad upon the resumption of thelawmakers from a long recess, asked the Senate to approve $4.054 billion, €710 million and $125millionfreshexternalloanstofund projects captured under the 2018-2021 borrowing plan. In his letter dated August 24, 2021, to the senators, the president disclosed thattheprojectslistedintheborrowing planwillbefinancedthroughsovereign loansfromtheWorldBank, FrenchDevelopmentAgency( AFD), China-Exim Bank, International Fund for Agricultural Development (IFAD), Credit Suisse Group and Standard Chartered/ ChinaExportandCredit(SINOSURE). He added that the loans would be used to fund federal and state governments’ projects that cut across key sectors, such as infrastructure, health, agriculture and food security, energy, education and human capital development, as well as COVID-19 response efforts. The letter reads: “I write on the above subject and submit the attached addendum to the proposed 2018-2020 external rolling borrowing plan for the considerationand concurrentapproval of the senate for the same to become effective. The distinguished Senate President may recall that I submitted a requeston2018-2020borrowingplanfor the approval of the Senate in May 2021. “However, in view of other emerging needs and to ensure that all critical projects approved by FEC as of June 2021 are incorporated, I hereby forward an addendum to the proposed borrowing plan. “The projects listed in the external borrowing plan are to be financed throughsovereignloansfromthe World Bank, French Development Agency, EXIM Bank and IFAD in the total sum of $4,054,476,863 and €710 million and grant components of $125 million”. The Senate has since begun legislative work on Buhari’s request through its Committee on Foreign and Local DebtfollowingadirectivefromtheSenate President, Ahmad Lawan. Justifying the rising external debt profile of the country under Buhari’s administration, the Senate President dismissed comments that the borrowings were not sustainable. While insisting that nothing could be done to halt the rising external debt profile, Lawanblamed past administrations ‘lack of foresightto providefor the rainyday’asthereasonbehindBuhari’s administration’scontinuousborrowing plan. He said: “The Senate has passed the stage of discussing not to borrow, the issue is what are we borrowing for? We areinahurrytodevelopourinfrastructures but we need to be strict with the conditions. What are the moratorium? If it isn’t favourable, we slow down. But we can’t say we shouldn’t borrow. “When you don’t make hay while the sun shines, this is the kind of thing you face. We wasted our resources when we had the chance. Now, our options are limited. I know we need to reduce borrowing but the Committee of Finance is doing enough to ensure that Government Owned Enterprises increase revenue for the country. “I want to challenge all the revenuegenerating agencies, they need to do more because we have given them enough support and they have no reason not to improve on their collection. I think it is high time our Committee on Finance and others look at some of the agencies that we should stop funding. They collect to spend but have nothing to remit. “Again, there are some MDAS that shouldn’t exist anymore, they are no longerrelevantbuttheycontinuetocollectfundsfromthefederalgovernment”.

EAC chair’s verdict


Upon the fresh loan request by President Buhari, Chairman of the Economic Advisory Council (EAC), Dr. Doyin Salami, has said that notwithstanding the comfortable debtto- Gross Domestic Product (GDP) ratio of 35 percent, the nation’s public debt stock is unsustainable. He had raised similar concerns in 2018 while speaking on fiscal governance at the Nigerian Economic Summit (NES24) In a presentation titled, “The State of the Economy”, Salami, a former member of Central Bank of Nigeria’s monetary policy Committee, noted that it would be difficult to maintain the nation’s debt profile with debt service-to-revenue ratio at 97.7 per cent (January to May 2021). He also lamented that the country’s debt stock is estimated to hit a staggering N54 trillion when Ways and Means aswellastheAssetManagementCorporation of Nigeria (AMCON) liabilities and projected fiscal deficit for 2021 are put into consideration. The economist while pointing out that the federal government’s expenditure had been on the increase, and at a faster pace than its revenue, added that publicdebthadcontinuedtoexpandon the back of growing fiscal deficit. On how to improve on the nation’s revenue portfolio, Salami urged the Federal Government to ensure blockageof allleakages, unlockopportunities atstatelevel, improvetaxefficiencyand coverage, and also sell-off dead assets, which are estimated at $900 billion. “From January to May 2021, actual fiscaldeficitwasN3.01trillion, representing 53.8 per cent of total budgeted deficit for 2021. While overall expenditure has grown by 102 per cent, from N5 trillion to N10.1 trillion between 2015 and 2020, revenue increased by just 15 percent. “Foreign Direct Investment (FDI) inflow was $875 million in the second quarter of 2021, which was the lowest quarterly inflow since first quarter of 2016. FDI inflow into Nigeria had revolved around $1 billion in the last five years. FDI inflow in the second quarter of 2021was$78million, evenlowerthan Q2 2020. “Thissubduedgovernmentrevenue is as a result of constraints around domestic production/investment; low tax base, astaxrevenuetoGDPstillrevolves around seven per cent; limited effort to explore and unlock opportunities for    revenue generation at state level; overcentralisation and issues relating to efficiency in revenue collection. “The country’s investment climate was being constrained by macroeconomic instability, policy inconsistency, inadequateinfrastructure, insecurity, as well as tough business climate. “Macroeconomic stability, consistency of policy and regulation, sectoral reforms, human capital development, and resolution of the security crisis were key to the economy’s ability to rebound. “The way forward for the country wasfortheStateHousesof Assemblyto help inimproving statecompetitiveness byreallocating spending priorities. More emphasis should be given to human capital development and the provision of social amenities for the populace”.


NGO, lawyers speak


A rights organization, the Socio-Economic Rights and Accountability Project (SERAP) and some senior lawyers have are pushing for an immediate halt of the nation’s rising debt profile. SERAP particularly asked leadership of National Assembly to reject the fresh loan request of the president pending when details of spending of all loans obtained since May 29, 2015 by the government are published. In an open letter dated 18th September, 2021, andsignedbySERAP’sDeputy Director, Kolawole Oluwadare, the organization expressed “concerns about the growingdebtcrisis, thelackof transparencyandaccountabilityin the spending of loansthathavebeenobtained, and the perceived unwillingness or inability of theNationalAssemblytovigorouslyexercise its constitutional duties to check the apparently indiscriminate borrowing by the government.” The letter, copies of which were sent to Chairmen of Public Accounts Committees of the National Assembly reads: “The National Assembly should not allow the government to accumulate unsustainablelevelsof debt, andusethe country’s scarce resources for staggeringandcripplingdebtservicepayments rather than for improved access of poor andvulnerableNigerianstobasicpublic services and human rights. “Accumulation of excessive debts and unsustainable debt-servicing are inconsistent with the government’s international obligations to use the country’s maximum available resources to achieve progressively the realisation of economic and social rights, and access of Nigerians to basic public services. “The country’s public debt has mushroomed with no end in sight. The growing national debt is clearly not sustainable. There has been no serious attempt by the government to cut the cost of governance. The leadership of the National Assembly ought to stand up for Nigeriansby assertingthebody’s constitutional powers to ensure limits on national debt and deficits. “SERAP urges you to urgently propose a resolution and push for constitutional amendment on debt limit, with theintentof reducingnationaldebtand deficits. This recommendation is entirely consistentwiththeconstitutional oversight functions and spending powers of the National Assembly, and the country’sinternationalanti-corruption and human rights obligations. “Indiscriminate borrowing has an effect on the full enjoyment of Nigerians’ economic and social rights. Spending largeportionof thecountry’syearly budget to service debts has limited the ability of the government to ensure access of poor and vulnerable Nigerians tominimalhealthcare, education, clean water, and other human needs. “Should the National Assembly and its leadership fail to rein in government borrowing, and to ensure transparency and accountability in the spending of public loans, SERAP would consider appropriate legal action to compel the National Assembly to discharge its constitutional duties. “TheNationalAssemblyunderyour leadership has a constitutional responsibility to urgently address the country’s debt crisis, which is exacerbated by overspending on lavish allowances for high-ranking public officials, lack of transparency and accountability, as well as the absence of political will to recover trillions of naira reported to be missingormismanagedbytheOfficeof the Auditor-General of the Federation. “The National Assembly should stop the government from borrowing behindthepeople’sbacks. Lackof informationaboutdetailsof specificprojects on which loans are spent, and on loan conditions creates incentives for corruption, and limits citizens’ ability to scrutinise the legality and consistency of loans withtheNigerian Constitution of 1999 (as amended), as well as to hold authorities to account. “SERAP notes that if approved, the country’s debts will exceed N35 trillion. Thegovernment is also reportedly pushing the maturity of currently-secured loanstobetween10and30years. N11.679 trillionisreportedlycommittedintodebt servicing, while only N8.31 trillion was expended on capital/development expenditure between 2015 and 2020. “Ensuring transparency and accountability in the spending of loans by government and cutting the cost of governance would address the onerous debt servicing, and improve the ability of the government to meet the country’s international obligations to use maximum available resources to ensure the enjoyment of basic economic andsocialrights, suchasquality healthcare and education”. However, on their part, the senior lawyers while calling for restraint over the government’s borrowing attitude said the rising debt profile is worrisome. Speaking on the issue, a rights activist and Senior Advocate of Nigeria (SAN) Chief Mike Ozekhome, was critical of Buhari administration’s penchant for borrowing saying it has mortgaged the future of Nigerians up to three generations. Ozekhome said: “The truth is that the future of Nigerians, up to three generations have already been mortgaged by this government. President Obasanjo worked assiduously to get Nigeria’s debts either fully paid up or totally forgiven. He left a clean slate for the Yar’adua’s government. “The debt profile of Nigeria before the Buhari’s government was literally miniscule. He has however ballooned it to nearly N36 trillion and still counting. Thegovernmenthasnoeconomic blueprint. It operates by rule of the thumb under intense fire brigade approach. Even the economic team it finally inaugurated with much reluctance is in doldrums and shambles. This government has therefore failed in its key tripodal spheres- economy, security and anti-corruption. We have never had it so bad as a nation”. Speaking in the same vein, another silk, Mr. Seyi Sowemimo (SAN), accused the National Assembly of not being circumspect enough in approving the president’s loan requests. “Even the National Assembly members appears to be complicit in the whole arrangement because they are the ones approving these loans. We are all not very comfortable as to how these loans will be paid. It’s like a trap and the National Assembly is suppose to be a check on the president but the reverse is now the case. “This is an indication that we don’t have any safeguard anymore. The people are shouting but there’s no way we can stop it from happening. The present generation of Nigerians and those unborn may suffer the negative effect of all these borrowings. It’s a tragic thing that in this country things are happening to the dissatisfaction of members of the public but their representativesattheNationalAssemblywho are expected to rise to their defence are nowhere to be found. “That’s why some of us are saying we are tired of speaking on issues in this country. This is because there’s no way these issues can be addressed when those who are supposed to act as a check are part of the process. This shows that there’s nothing much that can happen beside talking about the issues. It is when journalists continue to write about the issues that we can have some respite”, Sowemimo said. Dr. Fassy Yusuf also expressed fears over the growing debts saying it calls for worry. He said: “As monetary economists and experts in finance would say, there is nothing wrong in borrowing, it is the application of what was borrowed that is critical. If the Federal Government is open enough to tell us and we know and see that the loans being borrowed are utilized for the provision of critical infrastructures that are the basis for development, then, the ability to pay in the future will not be jeopardized. “However, if on the other hand, all what are being borrowed are being used for servicing debts and for recurrent expenditure, then, we are in deep trouble. It also means that the future of our children and those yet unborn are in jeopardy. “I would advice the government to be more transparent in the application of theseloans, may be, therewould beaneed to bring in experts from the Civil Society Organizations (CSOs) and the private sector. This will allow for proper dissemination of information when these loans are being deployed. Citizens will then be assured that these funds are being used judiciously. Many of these issues are shrouded in secrecy, this means government should be more transparent”. Mr. Ige Asemudara described the nation’smounting debtprofileasabig mess. “It is a big mess. Government has lost direction under Muhammadu Buhari. Thedebtportfolioof thisnationhasrisen four times above what the previous administrationleft. Thisregimeisafraud. It borrowsforeverything withoutaccounting for either the Internally Generated Revenue (IGR) or the loan. Nothing has changed in our educational system, nothing has changed in our health system, nothing has changed in infrastructural development. We are worse on the corruption perception index. The National Assembly is complicit in this mess. Why will they continue to approve loans that are unaccounted for? We all must rise”, Asemudara said.

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