$30 billion loan, Nigeria’s rising debts
For three years, Nigeria has ran its economy on the wheels of creditor banks, doubling its debt profile to an alarming $81.27 billion in 2019.
The country’s debt profile escalated since 2016. As a former Chief Executive Officer, Nigeria Economic Summit Group, NESG, Prof Anya O. Anya, observed, Nigeria took more loans in the last three years than it borrowed in the 30-year period preceding 2016.
Perhaps, such unbridled borrowing was triggered by the crushing recession of 2016 which left the nation relying on external and domestic help to fund barely everything, from projects to even salaries.
But experts also cite lack of financial discipline or recklessness on the part of public officials, and the failure of the current administration to be creative with its policy of diversification of the economy to generate more revenue.
It’s been three years since the country exited recession and authorities are not prepared to slow down on borrowing. Questions also arise from humongous tax returns by the Federal Inland Revenue Service, FIRS, into national coffers.
Recently, the President of African Development Bank, Dr Akinwumi Adesina, warned that Nigeria is currently using 50 per cent of its revenue to service its debts, compared to the average of 17 per cent for other African countries.
However, while experts are worried over the country’s mounting debts, its debt managers are optimistic that the nation still within the limits of borrowing as it has one of the lowest debt to Gross Domestic Product, GDP, ratio.
Being a nation bedevilled by endemic corruption and systemic problems, suspicion also resonate that monies borrowed may not have been judiciously applied. According to Anya, the first lesson one learns in business is that you do not take loans except it is to expand your business. Therefore, there is no justification for borrowing to pay salaries.
Despite warnings from experts to slow down on borrowing, the current administration is pushing for the approval of the National Assembly to borrow $39.96 billion to fund projects across the country.
The $29.96 billion fresh foreign loan which was presented as the external borrowing plan 2016-2018, had earlier been rejected by the eighth National Assembly.
The president argued that the loan was to execute critical infrastructure projects. If the National assembly approves the President’s request, Nigeria’s total debt portfolio would rise to $97billion.
The question on the lips of every Nigerian is who will pay these debts? While it is understandable that government exhibits genuine intentions to develop the country, and thus the prospects of properly applying the loan, it must also realise that Nigeria’s problems cannot be solved under one administration. It is poor management and bad politics to leave your predecessor with a huge financial burden.
Already, half of the country’s overall revenue is channeled to debt servicing. That fraction will increase significantly if the country goes ahead to borrow $29.96 billion fresh foreign loan for whatever reason.
While it is unarguable that so much remains to be done in terms of development but very little money at hand, government must vigorously pursue its policy of diversification to ensure that the country fully exploits the extractive and agricultural industries to contribute to national development.
Its focus on taxes as an alternative to financing budgets is already creating negative effect on taxable Nigerians especially as the economy struggles to recover.
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