Emerging economies across the world, especially countries across sub Saharan Africa, have always had a date with debt servicing. And this alone is causing a huge deficit to their domestic fiscal policies. This situation compels many of these emerging economies work through tight measures to ensure adequate budget in a fiscal year. For instance, African countries’ debt profiles read in hundreds of billions of dollars. The burden of servicing such debts had in recent times brought these economies to their knees. A scary example of a debt crisis ridden country is Sri Lanka. Our close neighbour Ghana is seeking for debt restructuring.
Regrettably, Nigeria is one of such countries that is struggling year in, and year out. Held backward by the syndrome called debt servicing that runs into trillions of naira. With a hindsight, in the last seven years, Nigeria’s debt servicing payment as gone upward above N16 trillion. This figure is from the Debt Management Office (DMO) as of June 2022. Our total national debts stood at N42 trillion at the end of August 2022. One may wonder why all this big figure in debt and no meaningful benefits to Nigerians. The reality is very obvious and staggering to behold.
Nevertheless, here we are again, the 2023 budget of N20.51 trillion has been placed before the National Assembly for Appropriation. And a sum of N6.31 trillion is therein for ‘Debt Servicing’. However, analysts have always feared that with the current debt status, the economy is finally on a fiscal cliff. Sadly, for the coming year 2023 budget, about 65 per cent of expected revenues is to service debt.
The annual meeting of the Boards of Governors of the International Monetary Fund (IMF) and the World Bank Group (WBG) has just ended at the weekend in Washington DC United States of America. The meeting brings together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organisations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.
At this year’s IMF/World Bank spring meeting, the Nigeria delegation was led by Minister of Finance, Budget and National Planning, Zainab Ahmed. According to media report, Zainab Ahmed and the federal government delagation that also included the Central Bank of Nigeria, CBN, Governor Godwin Emefiele, engaged the Bretton Woods institutions on debt restructuring for the country. This is a strategic focus on the part of the federal government to explore debt restructuring relief and options.
The minister of finance said, “We have been engaging financial institutions to look at the opportunity to restructure our debt to further stretch the debt service period to give us more fiscal relief. Those are some of the things we want to achieve in this meeting.”
Interestingly, President Muhammadu Buhari had at the United Nations General Assembly in September sought the assistance of world leaders in considering granting debt relief or outright cancellation to developing countries.
It is a fact that Nigeria’s debt has increased over the last seven years and this increase in debt, painfully, is not just occasioned by the different kinds of exogenous shocks that the country faces. Rather poverty of leadership vision and foresight is also responsible. Although Nigeria suffers from an ‘elite bargain’ crisis, nonetheless, we cannot rule out the greed of global financial capitalists and monetarists proclivity for raising interest rate. Unfortunately, this as increased the cost of debt servicing.
Without mincing words, debt is a big problem to Nigeria’s economy. And a clear indication of it is that, it is a
systemic and institutional problem that requires urgent attention, of which debt relief or restructuring through pragmatic negotiations cannot be over-emphasised. For us, any decision taken to achieve debt relief, and more move towards macroeconomic stability is welcome.
Going forward, we expect the government to be prudent and spend public resources for the greater good of the people. Piling up debts on the excuse of we are yet to borrow up to 30% of GDP or in the guise of the failing neoliberal orthodox economics statistically mathematics of GDP to debt ratio calculation by our uncritical policymakers must stop.
We have recognised that we live in an economically turbulent times. Passionately, our call is to the Nigerian state managers to appreciate the importance of social contracts binding them to citizens. It demands mutual expectations of thorough macro-prudential policies, visionary and pragmatic to address our development challenges without burdening us with debt.
Olamilekan
Political Economist
Email: [email protected]
Tel: 08107407870,08073814436
