As often happens in socio-culturally heterogeneous African states where centrifugal forces tend to obscure and mystify every national issue, the ongoing hullabaloo over Nigeria’s mounting public debt is threatening to assume the character of an ethno-religious crisis as politicians and clergymen weigh into the matter that is supposedly within the purview of economists and finance experts. Of note is the recent expression of concern by Pastor Enoch Adeboye, the influential General Overseer of the Redeemed Christian Church of God (RCCG) who, in course of delivering a special sermon in commemoration of Nigeria’s 61st Independence Anniversary, on October 3, 2021, commented:
“If we have a problem in our nation, it has to do with economics … When I asked those who understand the language and how much we need to service our debt, they said that it is the interest you pay so that they will know you are alive … What is needed to pay and keep our debt breathing is about 98% of the nation’s income. We have problems and we are still borrowing a little bit more.”
Unequivocally, the 79-year old billionaire Pastor Adeboye, reputed for his simple sartorial taste and popularly known to his flock as “Daddy G. O.,” decried the worrisome development whereby nearly all of Nigeria’s revenues are being channeled towards debt servicing, wondering why the government was still engaged in further borrowings even as the rising levels of indebtedness posed a clear danger to the country’s socio-economic stability. Expectedly, he invoked divine intervention: “When God has a hand in the affairs of a nation, he can turn the tide economically … Whether you like it or not, one way or the other, Nigeria will survive. Very soon this country will be another testimony to the world …it is well with us …”
In a country where battle lines are often drawn along religious lines, it’s a little bit surprising that no notable member of a rival sect has challenged Pastor Adeboye’s expressions on the national debt issue. Perhaps, the gargantuan nature of the debt renders such a challenge an unpopular undertaking, but chances are that a sectarian confrontation may yet occur to taint the real issue at stake: the unsustainability of the federal and state governments’ borrowing spree.
According to the March 2021 figures released by the Debt Management Office (DMO), the central coordinating agency for the country’s public debts, Nigeria’s debt stock stood at N33.11 trillion, with a domestic component of N20.63 trillion (62.33%) and N12.47 trillion (37.67%) external loans. Of the domestic debt, the federal government’s share is N16.51 trillion (80.03%), while the 36 states and the Federal Capital Territory, Abuja, owe N4.12 trillion (19.97%). It is, therefore, a matter of utmost concern that while well-meaning Nigerian individuals are bemoaning the county’s unwieldy indebtedness to both external and domestic lenders, federal and state government officials appear unperturbed.
At a press conference on October 6, 2021, three days after Pastor Adeboye’s lamentation from the pulpit, the Minister of Finance, Budget and National Planning, Ms. Zainab Ahmed, maintained that the country’s debt-to-Gross Domestic Product (GDP) ratio of 23% was still within acceptable threshold. According to her, “Nigeria’s borrowing has been of great concern and has elicited a lot of discussions, but if you look at the total size of the borrowing, it is still within healthy and sustainable limits …We are enforcing fiscal discipline to expand our fiscal space so that we can continue to service our debt and borrow more to build our infrastructure capacity.”
Interestingly, successive governments in Nigeria have bandied low debt-to-GDP ratio as an excuse to engage in unrestrained, and sometimes, irresponsible borrowings. Unsurprisingly, an ageing and ailing President Muhammadu Buhari has latched onto this excuse as captured in his 2022 annual budget estimates presentation to the National Assembly, on October 6, 2021: “Some have expressed concerns over our resort to borrowing to finance our fiscal gaps. They are right to be concerned. However, we believe that the debt level of the Federal Government is still within sustainable limits.”
Analytically, a country’s ability to sustain its indebtedness is measured by its debt-to-GDP ratio: the lower the ratio, the higher the sustainability, vice versa. And, with Nigeria’s ratio presently at 23%, analysts maintain that its debt burden is sustainable. To them, it matters little that about 98% of the country’s revenues is gulped by debt servicing. In this respect, Pastor Adeboye may well be right in asserting that the problem of the country has to do with proper understanding of economics.
Truly, given the opportunity, a Nigerian economic policy-maker is prepared to produce verbose tomes of recycled classical and neo-classical theories, while presenting them as new ideas. Little wonder the Nigerian media space is presently saturated with analyses related to the use of public debt as a critical instrument for funding public expenditure in a situation of government’s inability to raise taxes upon the citizens; and how debt is a major stimulant for rapid economic growth in developing countries. Conspicuously missing in the analyses is the fact that corruption and other related factors, occasioned by weak institutions, often negate the benefits accruing from debt-funded public expenditure in developing countries like Nigeria.
Be that as it may, a situation where about a quarter of a country’s annual budget is ploughed into debt servicing cannot be considered reasonable or sustainable as witnessed in Nigeria within the past five years. And, as a developing country, Nigeria does not need any economic soothsayer to understand that its present position is unsustainable, otherwise, it’s clearly headed for a debt crisis from which there is no escape. In the 1980s, Latin American states, including Argentina, Brazil, and Mexico, found themselves in a debt crisis situation that culminated in the Mexican debt default of August 1982. That crisis brought the entire region to the brink of economic ruin but, for the subsequent debt relief granted by lending institutions and countries, the story might have been different.
In April 2006, Nigeria received plaudits for leading the rest of the African continent in substantially reducing its international indebtedness through negotiations with the 22-member Paris Club of lending countries, which “forgave” an outstanding debt of about USD18 billion, following the repayment of USD12.4 billion due obligations. Unfortunately, barely one and half decades later, the country is even in a worse position. But, the major concern of most Nigerians is that the infrastructure projects for which the debts were incurred are not readily identifiable, prompting a common question: What, and where, are the infrastructural facilities for which the federal and state governments incurred the combined debt of N33.1 trillion (USD87.24 billion) between 1999 and March 2021?
Although rightly hailed as Africa’s largest democracy, due to its unrivalled huge population estimated at 200 million, Nigeria operates a prebendal political system characterized by systemic corruption, with government officials and ruling party members considering it a matter of right to use state resources for personal gratification. Prebendalism, as exemplified by Nigeria, involves the ruling elite (comprising government officials, ruling party cronies, their relatives as well as members of their ethnic and religious groups) corruptly accumulating wealth at the expense of the state, while the state shoulders the failures and liabilities of the ruling elite; all in a vicious cycle of corruption, mass-exploitation and underdevelopment.
The Nigerian masses, who are forced to endure lack of basic infrastructural facilities in the forms of uninterrupted supply of electricity, portable water, good vehicular roads, affordable healthcare, qualitative education, etc., know too well that their country’s increasing financial indebtedness is the end-product of high-level profligacy, impunity, and corruption that are rampart in government; and that if the true story of the indebtedness were to be told, much of the loans were actually looted by way of inflated project contracts, over-invoicing, and outright theft.
Nevertheless, some people maintain that it is a favourable development that Nigeria’s huge debt stock comprises a larger domestic component of N20.63 trillion (62.33%), arguing that domestic debts repayments help to stimulate higher rates of economic growth, since the principal and interest payments are, in reality, reinvestments in the economy. Others have refused to buy that simplistic argument, noting that it’s a subtle excuse for further unrestrained borrowings. To them, debt accumulation, whether external or internal, is not a healthy development as it is more likely to lead to a “black hole” from which there is no exit.
Objectively, available information point to the fact that the generality of Nigerians have benefited little or nothing from the massive debts accumulated by successive governments in the country, for the following reasons, among others: Many of the loans were not obtained via due process, hence they are unaccounted for; Unfair loan agreements led to debts growing faster than repayments; Most loans were not made available for infrastructure development as they were re-used for debt servicing; Self-aggrandizement largely informed the loans contracted by military dictatorships; Loans were negotiated for white elephant projects to the knowledge of the lenders; Lastly, connivance between borrowing government officials and lenders led to diversion and outright stealing of borrowed funds.
Against the backdrop of the foregoing, there arises the need to reiterate the old adage, which holds that “He who goes a-borrowing goes a-sorrowing.” For, apart from individuals, the time-tested phrase also finds relevance in the affairs of states, especially in a prebendal African political-economy like Nigeria. But, unlike the lone individual who singularly shoulders the responsibility of his chronic indebtedness, the government undertakes the responsibility of a state’s borrowing, while the masses shoulder the repercussions of its indebtedness. Thus, as the Nigerian federal and state governments go a-borrowing, the hapless masses go a-sorrowing.
Dennis Onakinor is a public and international affairs analyst who lives in Lagos, Nigeria.