The debts are increasingly becoming excessive
Already battered by high levels of socio-economic stress, Nigeria’s ever rising debt portfolio is causing increasing anxiety. Unfortunately, authorities in Abuja and the 36 states have continued to sneer at genuine concerns as the loans keep piling up, raising the spectre of another debt trap in future. With last week approval by the World Bank of three fresh loans totalling $1.1 billion, the current administration of President Bola Tinubu has amassed more than $8 billion since coming to power in May 2023.
While experts within Nigeria and multilateral lenders have continued to counsel against increased borrowings amid plummeting revenues, nobody seems to be paying much attention. Last week, the Lagos Chamber of Commerce and Industry (LCCI) expressed concern over the rising debt with the fresh loan from the World Bank. According to the LCCI Director General, Chinyere Almona, Nigeria’s rising debt burden “is a growing concern, particularly given the slow pace of disbursement and implementation of previously approved loans.” She further stated that with the World Bank’s share of Nigeria’s external debt reaching $17.32 billion, “the question of debt sustainability becomes increasingly pressing.”
We understand that borrowing may be inevitable, especially at a period like this. But there are serious concerns at the rate these debts are being piled up in Nigeria. Aside the fact that the funds are not being deployed into projects that generate income, borrowing should not be done in such a way to mortgage the future of the country and its sovereignty. In its 2020 Macroeconomic Outlook, the Nigeria Economic Summit Group (NESG) had stated that “Nigeria’s mounting debt profile is a major concern despite the country having about $900 billion worth of dead capital in properties and agricultural lands”, referencing the 2019 PwC Nigeria, report. The situation has since worsened. Our debts are not only increasing, but so also are the amounts we need to put aside every year to service them.
The president and the state governors are aware that we cannot borrow our way out of the current fiscal mess. Since borrowing is extra money in circulation that is not backed by production, a profligate mindset is one of the worst ailments that can afflict a government. All Nigerians are paying for the overdraft to government not just in increased public debts eventually but also, and more importantly, through increased inflation. To worsen matters, most of the federal government projects for which jumbo loans were obtained cannot even earn enough to fund their operations, leaving many to wonder how the debts would be repaid.
The underpinning philosophy of this government seems to be that debt is not a problem, and that we can pile on more without serious consequences. Not only does the direction of spending reflect this mindset but there is also no serious effort to get a handle on borrowing and push the graph downward. Unfortunately, National Assembly members that are ordinarily supposed to exercise oversight on the issue are more concerned about their own privileges. Meanwhile, the International Monetary Fund (IMF) has consistently warned Nigeria of the consequences, particularly of the servicing costs which could consume substantial amount of government revenues.
If the aim of borrowing is to help government attain their developmental needs in the areas of infrastructure, health, education, power, and transportation, it is a laudable idea. The challenge, however, is that over the years, authorities in both the federal and states have accumulated huge debts at public expense which were largely frittered away. While we must deal with such fiscal laxity at all levels, it is also important to understand that the solution to our challenges can be found inwards. There is no record that any country has borrowed its way into prosperity.
