Watch the debt!


Watch the debt!

With the latest report from the National Bureau of Statistics, (NBS), showing a quantum leap in foreign and domestic debts in the first six months
of the year, Nigerians’ anxieties about an imminent return to debt peonage would appear not entirely misplaced.
According to the NBS report, whereas the domestic component of the nation’s debt rose marginally from N14.02 trillion in December 2016 to N14.06 trillion in June, the stock of foreign debt jumped from $11.41 to $15.05 billion during the same period – a growth of N0.04 trillion and $3.64 billion, respectively.
Of the foreign debt component, the Federal Government’s share accounts for 74 per cent while the states and the Federal Capital Territory, (FCT) share the balance of 26 per cent. For domestic debts, the Federal Government again takes the lion’s share of 78.66 per cent while the states and the FCT account for 21.34 percent
Merely from the ugly experiences of the London and Paris Club debts which the country exited in 2005/6, it would seem that the best of arguments for the current hunger for international finance to jumpstart the economy have clearly not erased doubts about the wisdom of going that route again. Nigerians have surely not forgotten that the country had to shell out $12 billion – funds that could have been deployed to modernise the nation’s infrastructure – in final payments to exit the creditor cartel. Or the fact that a good number of the projects for which the humongous loans were obtained, never saw the light of the day. Or still, that a sizable chunk of the funds was stolen outright by officials. None of these however, would seem to compare with repayment terms so unabashedly skewed against the borrower – terms which, no thanks to the countless in-built penalty clauses, ensured that interests and penalties not only exceeded the principal sum borrowed, but left the original sum still intact – in what became the making of odious debts in the global finance literature!
Latest anxieties about the debt trajectory are therefore not without basis. Nigerians after all, could not have bargained for a situation in which she would escape from the clutches of a club of debtors only to sink into another cycle of peonage in just a little over a decade.  Like the absolute figures, in 2014 Nigeria’s debt to GDP ratio was 14.20%, it surged to 15.86% in 2015 and 21.38% in 2016. More troubling of course is the revenue-to-debt servicing-cost ratio which grew from 29% in 2014 to 38.2% in 2015 and 59 per cent in 2016.
We must of course admit to the dire realities which make the resort to borrowing both necessary and compelling. First is the continuing swing in oil prices with their negative impact on revenues such that makes wholesale reliance on government revenue for big ticket projects problematic. Second, is the below par performance of revenue earning agencies of government coupled with rampant corruption across-the-board. The factors, taken together with the yawning infrastructure gap which the Integrated Infrastructure Master Plan (NIIMP) reckons would require at least $2 trillion over the next three decades to deliver – an amount far beyond what the revenue profile could support – obviously makes debts an attractive option.
In any case, it is hard to see how the country can self-finance two of the Buhari administration’s priority projects – the railway modernisation expected to gulp US$6 billion and the US$5.792 billion (about N1.140 trillion) 3,050 megawatts Mambilla Hydro-Power projects under the current revenue profile without external funding.
Even at that, it does not appear premature to caution the Buhari administration over the growing penchant to take more loans. Aside loans being the last resort, it bears restating that they must be tied to  specific infrastructure projects sorely needed to catalyse the economy. They must be taken on such terms that are competitive and favourable while also delivering value to citizens for every dollar taken.
Considering ongoing revelations about huge unremitted sums by departments and agencies of government, there could be no better case for the government to look inwards to locate more of such idle funds to execute its naira denominated priority projects. That way, the government would have boosted its revenue while bringing down the revenue-to-debt servicing cost ratio to a more tolerable level.

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