Why National Assembly, PMB must watch Nigeria’s debt profile

In December 1983, Major General Muhammadu Buhari toppled a democratically elected government through a military coup by saying that the civilian government he overthrew was hopelessly corrupt.

“As a result of our inability to cultivate financial discipline and prudent management of the economy, we have come to depend largely on internal and external borrowing to execute government projects with attendant domestic pressure and soaring external debts, thus aggravating the propensity of the outgoing civilian administration to mismanage our financial resources.

Nigeria was already condemned perpetually with the twin problem of heavy budget deficits and weak balance of payments position, with the prospect of building a virile and viable economy. However, in the case of Nigeria, its impact was aggravated by mismanagement. We believe the appropriate government agencies have good advice but the leadership disregarded their advice. “The situation could have been avoided if the legislators were alive to their constitutional responsibilities. Instead, the legislators were preoccupied with determining their salary scales, fringe benefit and unnecessary foreign travels, et al, which took no account of the state of the economy and the welfare of the people they represented.” 

This was what Muhammadu Buhari, the military man said in 1984 while accusing both the legislators and executive members of not being financially disciplined and prudent in the management of the economy.

Nigeria’s debt has almost doubled since Buhari took over. Two months before he took office on 29 May – the country owed a total of N12 trillion. At the end of June 2015, the country debt had risen slightly to N12.1 trillion. By the end of June 2018, total public debt had almost doubled to N22.4 trillion. Going by these frightening figures released by the Debt Management Office, the total debt stock stood at some humongous N24.047tn as of March 31, 2019. As it is now, the debt has risen to N25 trillion (US$80 billion).

Frankly speaking, the recent request by President Buhari to the National Assembly to approve $30 billion of foreign borrowings after a similar request three years ago was rejected is scaring and Nigerians on the street do not want it, because Nigeria’s ever-escalating debt profile is scary and the economic situation in the country throws up some salient questions, all begging for answers.

Nigeria is using 50% of its revenue to service its debts! This is unsustainable. But this is just part of the economic malaise that has consigned millions of Nigerians to “multidimensional poverty” even as a few favored ones continue to enjoy the nation’s wealth. Surely Nigerians do not need comprehensive mathematics to understand that the country’s economic growth is undermined by the huge debt stock as well as other obvious factors including sheer profligacy in running the government. But, the situation has only worsened over the years.

Recall that in June 2017, experts like Prof. Pat Utomi and Mr. Bismarck Rewane expressed similar worry over the increasing debt burden at both the state and federal levels. It seems like most of the financial policies of the administration do not favor the masses that spent hours under the sun to vote the administration. It may be recalled that Nigeria’s Senate on 21 November 2019 passed the Finance Bill, 2019 after the third reading just as the House of Representatives is expected to know.

The bill, as presented to the National Assembly in October 2019, includes vast changes to the Companies Income Tax Act, Value Added Tax (VAT) Act, Petroleum Profits Tax Act (PPTA), Personal Income Tax Act, Capital Gains Tax Act (CGTA), Customs and Excise Tariff Etc. (Consolidation) Act and Stamp Duties Act. What really surprises Nigerians is whether our lawmakers understand the gravity of their actions in causing more hardship because contemplating an increase in VAT rate now is bad timing and inconsistent with the current economic reality. VAT increase will lead to higher inflation, interest rate hike, more unemployment and generally make people poorer.

One’s current concern, however, is who will pay these huge debts? Will the burden to be left by the reckless and frivolous political class not be too weighty for the lean shoulders of our jobless children? Will they not be turned to slaves and beggars in their own country by the creditor nations, just because they want to pay off the debts left by the locusts that have ravaged our common patrimony? But that is not all. One is surprised too about the speed with which governors go for questionable bonds at the end of their tenures. What is the guarantee that the incoming administrations and the subsequent ones would have the capacity to repay without harming the security and welfare of the citizens which are their primary reasons for being in government? The earlier we started having credible answers to these burning questions, the better for us all.