Let’s reduce Nigeria’s debt burden before it crushes us

Buhari

By Ace Omozuwa

The Deputy Secretary-General of the United Nations (UN), Amina Mohammed, while speaking at the International Monetary Fund (IMF) and the UN “working together conversation” penultimate Tuesday expressed worry over Nigeria’ increasing debt burden.

In a related development, the Chairman, Senate Committee on Local and Foreign Debts, Senator Shehu Sani, advised African nations against making loans the centerpiece of their fledging relationship with China. He sounded this note of caution last week Thursday while speaking at a roundtable organized by the Centre for China Studies in Abuja.

Sadly, Nigeria is accustomed to borrowing.  We seem to think that accumulated deficits are the pathway to Eldorado. Government debt, which is the summative deficits of previous years, could result from lack of fiscal discipline or the undisciplined pursuit of expansionistic national objectives. Public debt is not essentially bad. According to Alexander Hamilton, “a national debt, if it is not excessive, will be to us a national blessing.”

Keynesian economists advance the notion that borrowing in lean times is good for the long-term economic development of a nation. Reasonable public investment in lean times empower the private sector to thrive and when boom times come, government can then use rising tax revenues to pay back.  However, empirical data show that obtaining loans in developing nations is pro-cyclical. Due to the fact, developing nations find it extremely problematic to access capital markets in lean times.

For the better part of the 1980s Nigeria’s development was stalled because of huge government liabilities, and poor economic management.   To combat the adverse economic conditions the federal government introduced austerity measures, the implementation plunged many Nigerians to the pit of misery.  It triggered mass retrenchment of civil servants and unemployment rate soared. Many immigrants were forced out of Nigeria. During the austerity era, Nigerians queued for essential commodities and most often got nothing after hours on the queue, school fees were reintroduced.  All these measures failed to ameliorate Nigeria’s economic predicament and within two years our debt drastically escalated to $18 billion from $14 billion. The austerity measures failed to reduce budget deficit, in part, because, government spending cuts were ill-advised, and reactionary.

Between 1985 and 2005, when the Obasanjo led administration started making a case for debt cancellation, Nigeria’s external debt had soared to $36 billion. This was due to excessive borrowing by military regimes that were fixated on short term solutions to perennial challenges.  After assiduous work to obtain debt relief, on 21stApril, 2006, Nigeria made its final payment to the Paris Club. Our external debt profile became as low as $3 billion.

The gains of the debt relief seem to have been undermined by a coalescence of many factors, amongst which are; a lack of long term economic plan, precarious oil price, economic mismanagement, and our new appetite for foreign loans. According to reports by the Debt Management Office (DMO), as at June 30, 2018, Nigeria’s total debt profile was $73.21 billion or N22.38 trillion.  Against this backdrop, one must commend the IMF for warning that Sub-Saharan African nations are at increasing risk of debt distress due to huge borrowing and deficits, regardless of marginal economic growth. Last week Thursday, the West Africa Monetary Zone (WAMZ) also counseled governments in the sub-region to be wary of foreign loans.

Nigeria’s debt profile increased in last ten years or so from $3 billion to $73.21 billion. Tragically, there is nothing significant to show for it. Our roads and bridges are like those of war-torn nations. The sorry state of our airports makes it difficult for foreign visitors to believe we are the giants of Africa. Our hospitals are ill-equipped to effectively provide commendable health care. Public schools are in shambles. Unemployment rates are skyrocketing, because, functional industries are almost nonexistent and there are no viable institutional mechanisms to support startups.  A government can spend too much money and get very little done.  The Americans know this sad reality too; “When George W. Bush entered office, the national debt was $5 trillion. When he left, it was $10 trillion. I think the administration spent too much money.”

Ironically, while Nigeria’s debt burden is increasing poverty is ravaging Nigerians. The prestigious Brookings Institute in its recent World Poverty Clock estimated that 87 million Nigerians are now living in extreme poverty. According to the institute, Nigeria has overtaken India as the nation with the highest number of citizens living in extreme poverty.

Against the backdrop of this report, Former President Olusegun Obasanjo recently expressed concern over the seeming lackluster attitude of the Federal Government to the fight against poverty.  While interacting with the executive members of the Lagos State chapter of the African Democratic Congress (ADC) in Abeokuta, he  said, “the nation’s poverty index cannot be separated from the current administration’s handling of the economy… India is with a population of 1.3b and Nigeria is about 180m, yet, we still have the poorest citizens in the world. Nigeria does not deserve this, and this is the truth.”

Nigeria is floundering in debts and Nigerians are poor. To borrow Fela’s phraseology, this implies “double wahala for dead body.” Nigeria’s increasing debt is a threat to our national security. It is a threat to family harmony and marital bliss. It is a threat to our domestic stability. It endangers our capacity to drive growth with research and development, education, and health care.  This is not alarmist; if it appears so recall how the recent financial crisis of Greece almost undermined its sovereignty, or consider how hyperinflation has made cash cheaper than toilet paper in Venezuela.  If government does not put on its thinking cap and start seeking far reaching solutions to the impending economic collapse, we may become the basket case of Africa in the foreseeable future.

The urge or need to borrow will abate if government can reduce spending in non-critical areas. Two examples will drive home this point. First, in February 2017, the controversy-brewing chairman, Senate Committee on the Federal Capital Territory, Senator Dino Melaye, disclosed that the cost implication for the construction of the gatehouse of the three-bedroomed apartment of the official residence of the Vice President was put at N250m. Secondly, Media reports alleged that “the Office of the Secretary to the Government of the Federation, OSGF, in 2017 appropriated and claimed to have spent N65 million on its website.”  It was further alleged that a “review of the 2017 budget performance of the OSGF revealed that N65 million was budgeted for the already existing website while the office claimed that N64, 855, 875, the amount released, had been fully utilised.” These examples lend credence to the claim that many of our leaders in public service have the habits of the poor but the taste of the superrich.

Politics affects economics. There is a link between the political culture of a nation and the wealth of a nation. For Nigeria to get out of debt trap and enjoy prolonged economic boom, she must jettison her monetized and profligate style of politics. The prohibitive cost of politics in Nigeria incentivizes economic crimes that mortgage our collective wellbeing.

Nigeria cannot develop without investors. Sadly, high government liabilities can crowd out investors. When government gets too big and keeps borrowing it could trigger considerable “rises in the real interest rate, which has the effect of absorbing the economy’s lending capacity and of discouraging businesses from making capital investments.”

In view of this, it is important for government to reduce it size in creative ways. This administration sought to create a small government; hence, it merged some ministries together. Beyond mergers, government at different tiers should endeavor to reduce the retinues of political appointees of elected public officers. This habit of having mass political appointees is consolidating a political system that may be described as government of cronies and for cronies. Cronyism is part of the reasons why recurrent expenditure is almost always higher than capital expenditure. Let us do away with it.

It is morally imperative for government to reduce its debt burden. A moral government will do everything within its power to ensure it does not shackle posterity in the bid to solve present problems. If the self-acclaimed “wasted generation” did not have the scruple to invest in the future during economic boom, this government of change must sidestep the danger of compromising the future prosperity of our progenies. Diehard partisans should note that those of us who seek to ensure government spending is under control are not enemies of the government rather we want this government to a leave tremendous legacy. 

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