By Joshua Samuel
Many Nigerians are very concerned about Nigeria’s rising debt level and the lack of corresponding infrastructure growth. As on May 29, 2023, the situation, according to economists, will be fatal for President Muhammadu Buhari’s successor.
The Debt Management Office, DMO, recently predicted that if the National Assembly approved the Buhari administration’s 23.8 trillion Ways and Means Advances, Nigeria’s overall debt stock would reach N77 trillion in May 2023.
The Federal Government of Nigeria has received advances totaling FGN 55.3 trillion since Buhari took office, defying the Central Bank Act of 2007’s (Section 38.2) 5 percent of previous year’s income cap on such payments.
The Federal Government reported that in the first eleven months of 2022, debt servicing consumed more than 80% of its revenue. Sanusi Lamido, a former CBN governor, Kingsley Moghalu, a current CBN deputy governor, and economist Doyin Salami have all accused the bank of breaking the law in various forums.
According to Mrs. Zainab Ahmed, Minister of Finance, Budget, and National Planning, there is no reason to be concerned about the country’s debt profile because it has never defaulted before. The government’s excessive reliance on short-term borrowing to fund its operations, however, is the key significance, according to experts, as the government has been required to pay higher interest rates to entice investors and for rising inflation.
In response to the development, Mr. Idakolo Gbolade, a financial inclusion and wealth management expert, told PanAfricanVisions that the future administration should be concerned about the nation’s rising debt profile. “The budget for 2023 will not be an exception,” he declared. “The departing government has been supporting the budget through deficit expenditure.
The new government would face serious consequences as a result of the predicted increase in our debt stock to 77 trillion Naira since it will have to pay more to service the debt and important infrastructure projects will be impacted. This could make it difficult to complete capital projects in 2023 and result in subpar budgetary performance.
“By increasing the nation’s debt load, the government will be spending the riches of the next generation today. If not properly managed, this ongoing borrowing without a firm fiscal strategy may push Nigeria into a debt crisis.
“If you look at nations like the United States, for instance, which has the highest debt stock in the world, you will find that the economy is adequately regulated with a debt ceiling that is always debated by the US Congress every year before approval, despite the fact that the US economy has the capacity for the debt stock. Nigeria cannot be compared to this. “If the government is elected with our votes, Nigerians should demand greater accountability from it
“The people of Nigeria should not merely vote based on instincts; they should challenge every candidate for office. If the government does not find additional ways to increase revenue, the nation will not be able to pay its current obligations, which might total N77 trillion.
Additionally, Buhari is on the edge of mortgaging the future of unborn children, according to Prof. Godwin Oyedokun of Lead City University in Ibadan’s department of Accounting and Financial Development.
Borrowing money to finance any government expenditure profile is not illegal. My issue is that, based on your repayment plan, the borrowing has altered your expectations. If you wish to buy Limozin and then return to borrow, you will have problems. You depend on borrowing money to do all you want to do.
Therefore, it is positive when a government in power borrows to fund capital projects. However, the main issue arises when the monies borrowed are misappropriated and end up in politicians’ pockets rather than being used for the intended purpose.
“You mortgage the future of Nigerians and those yet to be born when you continue to borrow to the point that your predicted income is no longer equal to the borrowings. That is where the current administration makes a mistake. The argument that our debt to GDP ratio is still negligible in comparison to that of other nations is untrue. Because the systems in the nations to which we are being compared, like the US, are effective. Even when things aren’t there, they have backup plans and buffers in place.
“As was to be expected, you would borrow to the point where the consequences of borrowing would cause the demise of the nation, but when you borrow from a very toxic creditor, it will instruct you to refrain from doing certain things unless you first have our consent. In other words, economic gurus will tell you that the circumstances that come before are crucial because they will decide how the nation develops.
No lender will give you a loan without expecting something in return. The problem arises when people borrow without using common sense. I don’t want to think that individuals in charge of our economy are ignorant of the idea and dynamics of borrowing. One utilized theirs to promote debt forgiveness, while another promoted increased borrowing.
Nigeria needs to step up its game; the main economic implication is that borrowing by the government is not terrible provided the funds are not misappropriated or used for ongoing expenses, but if they are, it will be disastrous for the nation.