It is an old axiom that when you borrow to eat, prosperity naturally takes flight. Borrowing is not a taboo either by an individual or by a corporate or by a nation. For businesses to grow, loan facilities are sure catalysts and that is why it is somewhat impossible to see any successful entity without a borrowing and repayment portfolio. In plain language, the only time that borrowing is healthy is when it is utilised for the growth of a business or building infrastructure that in turn yields or aid production.
Not when you take a loan to, for example, buy food, pay salaries, buy palliatives for distribution, subsidise fuel.
Ironically, that is exactly what Nigeria has been doing for a very long time now. Any wonder prosperity has taken flight with nothing to show for the gargantuan debt profile racked up by the African giant. As of June this year, Nigeria had been credited with a staggering N87.38 trillion debt portfolio.
And according to analysts, this figure may hit N118.37 trillion in the next three years, going by the projections of the borrowing plan of the Federal Government. The figure was based on analysing Nigeria’s current debt profile and the debt projections in the Medium Term Expenditure Framework and Fiscal Strategy Paper 2024-2026.
According to the new MTEF/FSP, the Federal Government plans to take N26.42 trillion loans between 2024 and 2026. The fiscal policy also indicates that debt servicing will gulp N29.92 trillion in three years. The data showed that the national government plans to borrow N7.81 trillion in 2024, slightly less than the N8.84 trillion targeted for the same year in the previous MTEF/FSP. A breakdown for 2024 shows that the Federal Government plans to get N6.04 trillion from domestic lenders and N1.77 trillion from foreign creditors. By 2025, the Federal Government plans to borrow N8.54 trillion, which is also less than the N10.62 trillion targeted for the same year in the previous MTEF/FSP.
All these borrowing projections by a once prosperous economy, to say the least, are very depressing. When Wale Edun first stepped in as the prospective Minister of Finance and Coordinating Minister of the Economy, his pronouncements that Nigeria had borrowed enough was very spirit lifting and assuring. This was because his view seemed to address the anxiety expressed by Nigerians about the borrowing spree that characterised the latter days of the Muhammadu Buhari administration.
Nigerians would remember how the then Minister of Finance, Zainab Ahmed, downplayed the outcry that trailed the persistent borrowing of the last administration, saying that the Nigerian economy could still accommodate more borrowing. But going by the events and realities today, Edun, who was touted as a financial wizard, might have just spoken like a concerned Nigerian after all.
The current revelations that authorities had a planned timetable of borrowing even for three years after now shows that Edun did not have his facts when he said the nation had had its fair share of borrowing and might have to look inward to solve its monetary obligations.
The rising debt has led to an increasing cost of debt servicing over the years for the Federal Government. The World Bank recently projected that debt servicing would gulp 123.4 percent of the Federal Government’s revenue in 2023.
Another dimension was the Senate approval of a fresh N2 trillion borrowing, which went at a frenetic speed last week. The way things are, it is now as if there is nothing Nigeria can do without borrowing. To be able to replace stationery in any government office today, it has become practically impossible without borrowing. It is that scary.
So, how would such a country have any meaningful development? A document has revealed that the Federal Government has already spent 75.92 per cent of its aggregate revenue on debt servicing between January and July 2023. The MTEF/FSP 2024-2026 showed that the Federal Government had an aggregate revenue of N5.19 trillion in the first seven months of 2023, but spent N3.94 trillion on debt servicing within the same period.
The document added: “The aggregate expenditure for FY 2023 is estimated at N21.83tn, with a pro-rata spending target of N12.29tn at the end of July. The actual spending was N8.60tn. Of this amount, N3.94tn was for debt service, and N2.68tn for personnel costs, including pensions. Only about N857.08bn (25 percent of the pro-rata budget) has been released for MDAs’ capital expenditure as of July 2023.”
The debt servicing cost breakdown showed that the Federal Government spent N1.71 trillion on domestic debt, N530.48 billion on external debt, and N1.7 trillion on interests on ways and means advances.
The document said further in part: “The sustainability of public debt remains a significant concern, as high debt servicing costs and limited fiscal space constrain the government’s ability to invest in critical sectors such as healthcare, education, and infrastructure.”
Sometimes in the past, it was the tradition that the government would come up with a five, 10 years economic plan with disciplined implementation. But today, it’s strange that the only thing government appointees appear to spend their time and brain on is how to borrow all manner of funds.
If they could be so meticulous in planning, how come they allowed all the refineries to be run down and cannibalised? A report emanated this week revealing how a sum of N11.5 trillion had been spent in turn around maintenance of the nation’s refineries in 13 years without any result.
And while Nigeria was just sinking money into the drain, a single individual built one of the largest refineries in the world under five years under our nose. In fact, the level of wickedness of Nigerian leaders against Nigerians is very terrible. When the individual was building, the Nigerian government even assisted with loans! And that was the regime that paid subsidy for eight good years after screaming during the electioneering that subsidy was nothing but a scam. How many refineries would N11.5 trillion would have built instead of throwing fortune away claiming to do turn around maintenance of moribund refineries.
When loans are taken to buy palliatives, which are distributed to the citizens as hand out, how can a society grow when almost everybody looks forward to getting a hand out from the government? As a matter of fact, the present government has spent a princely sum on palliatives but unfortunately, the distribution of the items to intended beneficiaries has been anything but satisfactory. All over the country, it is almost the same story that the items failed to get to intended beneficiaries due to problems associated with a plan-less country like ours.
Even the credit transfer, which is part of the palliative, not a few Nigerians wonder how such lists came about. Those who government says are beneficiaries of the cash transfer, how were they captured? Definitely, one politician or a civil servant must have compiled lists of cronies as beneficiaries because that is the pattern such things are done in the polity.
So, how does a society with the bulk of its population living on palliatives grow economically?
Just as the Federal Government is piling up debts, so are the state governments. How could almost all the states in the country take loans to pay salary and pensions? Whereas agriculture is there that they can fund to be able to fight the food crisis confronting everybody. It’s just that all these funny individuals refuse to face the facts that when they become governors, they are there to proffer solutions to problems. All the states are blessed with abundant arable land and good farmers. Would it have been a bad idea if they spend part of what they spend on palliatives on food production? So instead of mopping up all the grains in the markets and packaging them in bags emblazoned with their pictures and distributing to their subjects as palliatives, a fraction of what they are allocated could have been used to assist some farmers in crop production to flood homes with food. It is a practical thing.
Now that it has become inevitable to borrow, even to eat snacks in the offices, one would expect that any loan taken by Nigeria would be utilised, for example, in building infrastructure such as reviving the moribund refineries so that the nation could refine its petroleum products locally, thus putting an end to expensive fuel import, which has nearly brought the economy to its knees.
The Bola Tinubu government should depart from its predecessor that preferred to pay ghosts billions for eight years in fuel subsidy. It should make sure that the December 2023 and first quarter timeline given for some of the refineries to come back to life is achieved. Not only that, it could even go ahead and obtain loans to build brand new refining facilities so that Nigeria will say bye bye to shipping out its crude cheaply and ruinous fuel importation adventure.
If Nigeria must borrow, such credit facilities should take care of power installations even though they have been sold to private concerns. But it is still a fact the Federal Government is still burdened with funding the sector. If power is stable in Nigeria, the economic problem confronting the nation would have been solved substantially. The Tinubu administration should critically look at the way the power corporation was unbundled and do what is necessary to allow the Distribution Companies and Generation Companies perform so that the Federal Government is no more burdened the way it is presently.
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Another thing is agriculture. If Nigeria must borrow, such loans should be used to fund agriculture for massive food production instead of the practice now whereby the government storms the market, mops up all available rice and beans in the name of buying palliatives to be distributed to the populace. If Nigeria had chosen to subsidise agriculture instead of the ruinous adventure of fuel subsidy, it would have become a very strong economic power in terms of food security. Even with any global economic crisis, the nation would have been insulated against hunger.
Then support for small, medium and large scale industries is another area that the government should consider if it must borrow. If Aliko Dangote could single handedly build a conglomerate that employs thousands of Nigerians, then it means that when many like him are supported, unemployment would have been defeated among the youthful population.
With the powerful combo of strengthening/building refineries, refurbishing or building power installations, funding agriculture and supporting the private sector, with loans by the Federal Government, it will just be a matter of little time and Nigeria and Nigerians will be out of the woods and once again return to the old glory of a really giant of the black continent.