Nigeria’s rising debt profile and the red flag

One of the running strings in the Nigerian economy, in nearly two decades of the Fourth Republic, is the rather ballooning debt profile. At nearly $12billion in foreign debt and N22billion in public debt, the forecast, by the best of economists at the Central Bank of Nigeria and some influential members of the Nigerian Economic Summit Group (NESG) is that the country’s debt profile would, in the next decade, be on the rise.
Some of the brightest pointers to that effect have been recent loans from the African Development Bank, World Bank and the Chinese Government. The lenders have been encouraged to oblige Nigeria, because of the appealing efforts of the Muhammadu Buhari Administration to curb corruption and spend prudently, in such capital projects as roads, railways, dry, inland container ports, port reforms and expansion, refurbishment and upgrading of the country’s airports and the diversification of the country’s economy, via agriculture, small and medium scale industries and encouragement of entrepreneurship amongst graduates of tertiary institutions.
The total foreign and domestic debt stocks of the Federal and the 36 States Governments as at December 31, 2016, stood at about $11.41 billion and N14.02 trillion respectively, said the National Bureau of Statistics.
The statistics Agency in its latest Nigerian Domestic and Foreign Debt report, 2016, said further dis-aggregation showed that $7.99 billion of the country’s foreign debt were from multilateral agencies; $198.25 million were bilateral (AFD) and $3.22 billion from the Exim bank of China credited to the Federal Government account.
The report said the Federal Government’s debt accounted for over 68.72 per cent of Nigeria’s total foreign debt outlay, while all the 36 states and the Federal Capital territory, FCT, accounted for the balance 31.28 per cent.
Equally, the total Federal Government debt, the report said, represented about 78.89 per cent of the country’s total domestic debt, with the states and the FCT making up the 21.11 per cent balance.
Data on the domestic debt stock by instruments, showed about N7.56 trillion, or 68.41 per cent of the total debt stock were in Federal Government bonds; N3.28 trillion, or 29.64 per cent in treasury bills and N215.99 million, or 1.95 per cent in treasury bonds.
Details of the foreign debts, on a state-by-state basis, showed Lagos State with the highest profile of $1.381 billion, or 38.7 per cent, among the 36 states and the FCT; followed by Kaduna with $222.881 million, or 6.25 per cent, Edo $183.64 million, or 5.15 per cent, Cross River $114.996 million, or 3.22 per cent and Ogun $103.416 million, or 2.9 per cent.
On the domestic front, Lagos State also topped among the 36 states and the FCT, accounting for 10.54 per cent of the total debts (about N311.76 billion), followed by Delta with N241.2 billion, or 8.15 per cent; Akwa Ibom N155.4 billion, or 5.25 per cent; FCT N152.8 billion, or 5.16 per cent and Osun N147.07 billion, or 4.97 per cent.
Between the Buhari administration, and Nigeria’s lenders, who have, over the years, proved to be very faithful allies and, sometimes very vociferous of Nigeria’s economic policy-makers and implementers, there is an understanding that the Nigeria economy is the resilient kind: recession may have struck unexpectedly, after years of grossly distorted economic indices by the Jonathan administration, like massive importation of rice, tax-evasion, unrelieved smuggling and mindless looting of the treasury via the Nigerian National Petroleum Corporation (NNPC), Nigeria’s lenders are hopeful that for the budgetary shrink, for which the Buhari Administration is known and the guarded rise in the price of crude oil, on which the Nigerian economy is mainly dependent, Abuja still has the encouraging profile to pay back whatever debt it owes them.
The payment of such debts may be well before the expiration of the grace period to such lenders, especially the World Bank. Nigeria is a well-believed borrower: the world’s foremost multi-lateral lender and development partner recognises that Nigeria never hesitated to defray her $22billion foreign debt – via a buy-back arrangement by paying about $18billion, at a time when the price of crude oil was nearly N150 per barrel in the international market.
That was during the Olusegun Obasanjo Administration, when Ngozi Okonjo-Iweala was the Finance Minister. It was a huge, necessary sacrifice, made by the Obasanjo Administration to convince the global community and long-term investors that they could do an honest business with Nigeria. The $18billion debt was partly a carry-over from the Military era-dating back 1987, when the Ibrahim Babangida regime effected its programme of Structural Adjustment Programme (SAP) and what other succeeding regimes borrowed. While Nigeria has been praised for her debt-payment profile, the World Bank and International Monetary Fund (IMF) are, currently, following the implementation of economic diversification in the agricultural and mining sectors.
How much the Buhari administration pumps into its programme to reactivate the cultivation of rice, cocoa, groundnut, rubber, maize etc. is of interest to Washington and Paris. There is the yam exportation programme that, hopefully, would boost the country’s forex drive and debt profile, the apex bank has forecasts, may start thinning out, in the next two years, based on its calculation of how much is expected from the Buhari administration’s Economic Recovery and Growth Plan (ERGP): Its recently-launched Focus Laboratories are expected to yield $24bn. The Nigerian Customs Service and Federal Inland Revenue Service, too, are expected to help matters, with nearly N3trillion within the distance. With so much in foreign debt, what the Buhari Administration is doing is a conscious attempt at classical economics for which it has invested in key, labour-intensive economic areas as agriculture, mining and other infrastructure to ease the country’s debt burden.
There’s also the invitation it has extended to the likes of Aliko Dangote to take advantage of its preliminary programme of partnership with the private sector to construct refineries, in the firm belief that there’s a limit that government, alone, can go in addressing the distortions in the country’s economy, while providing, as an umpire, the enabling milieu for investment through policies and implementation.
Still, critics and cynics, alike, are of the view that it was some form of shoddy economics and poor leadership that Nigeria – a vastly-rich country, with a very virile labour force – is borrowing too much money to service recurrent budgetary responsibilities, like payment of salary; a wasteful, unproductive exercise, they say.
Back in the 2017, there was a case of the Paris Cub Refund which the Federal Government disbursed to the thirty six state governments. Some state governments, acting almost recklessly, have formed the habit of borrowing from lenders supposedly to fund the development projects. But it’s on record that even though the Federal Government is persuaded by the intents of such governments and so, appends its signature to such loans, the funds, in most instances, never get utilised for their original intent. If they are, the projects, into which they are pumped, are either shoddily executed or abandoned by the contractors handling them; contractors, whose firms are cronies of the state governments or fronts used in siphoning public funds from the treasury. That, to a large extent, explains why there are a large number of uncompleted or abandoned projects in the country.
Add the fact that because nobody, not even the voters who elected such governments into office, has the power to question the budgetary rascality of a majority of the state governments. The anti-corruption Agencies – the Economic and Financial Crimes Commission (EFCC), Independent Corruption Practices and other related Crimes Commission (ICPC), alongside the anti-corruption Committees at the State level and at the House of Representatives and Senate are, perhaps, too weak to fight corruption with the tidy intent to help the country’s debt profile.
Most of the state governments are too lazy: in place of pressing Internally Generated Revenue (IGR) via their State Internal Revenue Service (SIRS), they prefer to laze away, waiting, in dishonorable idleness, for their monthly Federal Account Allocation (FAC). Perhaps, the only honourable exceptions here are Lagos, Rivers, Delta and Edo states. And yet, most of the states, in a betrayal of the high expectation of democracy, are owing their workers – especially, teachers – who voted them into office, an average of one year salary.
The story of Lagos State is quite interesting because it’s about the richest of the 36 states: its economy is about the fifth largest in the African top-ten league. Its economic dynamics are rested firmly on budgetary squeaze, aggressive internal revenue drive and investments in infrastructure and security – decidedly stubborn economic and administrative habits that breed confidence among investors and its business partners.
The plight of pensioners, since 1999, has been, put charitably woeful. Many of them have died of informed or forced despondency that they would never get their entitlement. In a betrayal of the democratic ethics, State Governments have neglected their responsibilities: Investments in the welfare of their labour force, via seasonal training and development programmes and paying their salary regularly. Otherwise, what explains the recent wasteful investment by the Imo State Government, led by Rochas Okorocha, with the valueless construction of a life-size statue of Jacob Zuma – the disgraced former President of South Africa – in Owerri, the state capital. Shouldn’t all the millions used in that meaningless structure have been pumped into paying workers’ salary or pensioners’ entitlements?
Until the coming of Buhari Administration, the state governments’ loan profiles were part of the weak links in the Nigeria economic chain. They were mainly economic parasites; a group of individuals who are bereft of ideas on how best to tap unto their labour forces and mineral blessings and so, draw in foreign investment. Thus, it’s plausible to argue that a sweeping majority of the states are a liability of the Nigerian debt profile. There’s a pressing need to address at state level, the debt crisis starting with a curb on corruption.
Besides, state governments should think less of collecting Federal Allocation, pay a pittance in salary or none at all and store a huge some of the billions of Naira somewhere in readiness for the next election.
For the Nigerian workers and pensioners in most states, democracy has been a curse. The debt profile, since the exit of the Military, unrelieved by bad leadership, which in recent years has found a graphic expression in gargantuan corruption, promises to be a burden on her workers, sustainable human development and, perhaps, generations yet unborn.