How private creditors’ financing compounds Nigeria’s debt crisis

In the last five years, many Nigerians are concerned about the country’s debt, especially because it is eating deep into the nation’s revenue.
 

The outcome of the findings, which was documented in a book titled, ‘the role of private creditors in Nigeria’s debt crisis and the human cost’, was presented last week.
 
In his opening remarks at the event, CISLAC’s Executive Director, Auwal Musa Rafsanjani, who spoke virtually, stated that the research became necessary because Nigerians can’t allow the government to continue to put them in perpetual poverty.
 
“We have analogue governments that are lazy to invest in human capital. This advocacy journey by CISLAC with support from Christian Aid became imperative because it will help prevent the future generations from the burden of debt.

“We find today’s engagement crucial to amplifying the interests of the 130 million multi-dimensionally poor Nigerians, as well as a huge percentage of those who sit above the poverty line, whose lives, livelihoods and future are being impacted by gross lack of adequate investment in critical social sectors and the growing threats of climate change. 

“As we all know, Nigeria is presently in a debt crisis- with a fiscal deficit well above the statutory threshold of 3 per cent, an increasingly unsustainable debt profile, a rising cost of debt servicing worsened by the rising interest rates, and socio-economic investments sacrificed at that expense. Government patronage of private creditors is plunging Nigeria into debt burden, impeding physical development.”

Rafsanjani listed collaborative engagements on this subject matter to include a research commissioned to fully highlight the Nigerian context and dimensions of the indebtedness to private creditors for policy options and deliberate efforts to ending it as well as a policy roundtable on the modality for setting a debt limit as a veritable mechanism for providing the parameter for checks and control of the debt stockpile of all the tiers of Government and ultimately avert a national public debt crises of bankruptcy proportions.

“As we share the findings of this research today, we hope that it contributes to protecting the interests of present and future generations by spurring present and incoming governments in Nigeria to commit to and take urgent actions to salvage the country from the current and impending economic throes,” he said.
 
While making his presentation on the FORGE research findings, an evidence based research on the role of private debtors in Nigeria’s debt crisis, Research Consultant, Botti Isaac, underscored the problems with patronising private creditors, the evils doing so accrues to a nation of Nigeria’s stature.

Disclosing that despite the law or legal framework guiding borrowing in the country does not support doing so outside of multi-lateral and bi-lateral arrangements, the governments have been violating the laws by seeking funding from private creditors.

He, however, faulted the requirements for accessing loan by the private creditors, which make it easy for government to take, but insisted that civil society groups and media organisations should continue to talk about the abnormalities until the right thing is done to save Nigeria from burden of such debts.

“We need to be concerned because most of the loans and their private creditors are not known to the public. The law is that loan can be taken from multilateral, bilateral at conventional interest rate.

“We also need to be concerned because it is difficult to understand the terms and conditions under which these loans are obtained, which is not the case if they were taken from the sources approved within the legal framework for borrowing.

“We need to be concerned because, despite that we borrow, we are still unable to meet our obligations.

“As we share the findings of this research, we hope that it contributes to protecting the interests of present and future generations by spurring present and incoming governments in Nigeria to commit to and take urgent actions to salvage the country from the current and impending economic throes,”

Corroborating the CISLAC boss, the head of Programmes, Christian Aid Nigeria, Victor Arokoyo said that government can’t be borrowing irresponsibly because it will have negative impact on generations to come.

Arokoyo said that the 75-year-old international faith-based development and humanitarian organization, which will be 20-year-old in Nigeria next month, believes that poverty is not a product of nature but of a systemic manipulation of the economic system skewed against some people to make them to be poor.

“In line with our economic, social and political justice, we are part of the tax justice and political platform in Nigeria. One of the things we are doing around that governance platform is the campaign for private creditors to begin to see the need not to give Nigeria loans again because the loan is costing government the ability not to respond to public services.

“For example, you can see from the graph that was shown by the research consultant, that such money is spent on servicing debt compared to what is spent on education and health.

“Foreign exchange violability has been contributing to the rise in foreign exchange debt, thus, higher debt burden results from constant depreciation of local currency.”
 
“So, there is no wisdom in it and there are other sources from which we can get money to address this. Particularly, what government is currently doing is against the law.

“The law prescribes the kind of loan you can take and where you can take it from. What government is doing now is to go outside that legal framework to collect loan anywhere the money is available and then put the country in serious debt burden.

“So, we are interested in widening the knowledge of citizens about this issue and possibly for citizens to demand from the government the need to look inward. Let us have some period of pains now so that we can have gains tomorrow, rather than have gains now and our children will have pains tomorrow.”

Recommendations in the research included the need for government to embark on venture that will boost its revenue generation; reduce reliance on borrowing from the international capital market; maintain a realistic debt management model to help improve debt sustainability and fiscal prudence; improve public borrowing transparency and accountability and strengthen the foreign exchange policy to reduce the impact of volatility on loan repayment.

The researchers also suggested the strengthening of the legislative review approval processes to ensure that only concessional loans are approved as well as establishing an independent committee that comprises CSOs representatives, the auditor general office.

They called on the Ministry of Finance and the DMO to carry out independent review of all future loan requests with the view to determine their variability and importance.

Also, the CISLAC boss ended the discussion by calling on the National Assembly to save the country from imminent economic collapse, just as the three tiers of government should develop realistic economic policy that will curb recklessness in spending.