President Muhammadu Buhari-led administration’s appetite for borrowing despite having less than 19 days to leave the seat of power has continued to be a severe concern to Nigerians.
The Budget Office of the Federation, World Bank, International Monetary Bank, and economic experts have frowned at Buhari’s borrowing spree.
According to the Debt Management Office, as of the Fourth Quarter of 2022, the total debt stock is N46.64 trillion, excluding the Central Bank of Nigeria’s Ways and Means loan to the federal government of N22.7 trillion, which the National Assembly recently approved.
Notably, from January to date, the country has acquired additional debts, pushing the debt figure to hover around N80 trillion.
At the inauguration of Buhari’s administration in 2015, Nigeria’s debt profile was N12.6 trillion but has now jumped to over N80 trillion in 2023.
The $800 million subsidy palliative loan from the World Bank is a singular case.
Despite calls from stakeholders for the current government to suspend the loan approval, Buhari wrote the National Assembly on Wednesday to consider approving the loan request.
During the last National Economic Council meeting, the Minister of Finance, Budget and National Planning, Zainab Ahmad, hinted at the suspension of fuel subsidies removal.
Despite the mixed reactions about the move, it did not last as Ahmed made a U-turn, noting that fuel subsidy removal was not suspended; instead, the discussion was extended to allow the incoming government to take the front seat.
On the ratio of Nigeria’s debt to revenue, the World Bank disclosed that the Country spent 96.3 per cent of its revenue for 2022 on debt servicing.
Although the Finance Minister, Ahmed, said the figure is 80.6 per cent, this can be, it is a pain for the Country. By implication, the situation would affect the economic well-being of Nigeria because it would lessen investment in infrastructure, human capital and other laudable enterprises.
Meanwhile, Wenjie Chen, deputy divisional chief of the International Monetary Fund (IMF), speaking recently at a function in Lagos, warned Nigeria against placing its 2023 budget sustenance on foreign loans.
According to him, the rising interest rates and uncertainties within the global market would make it hard for the Country to get foreign loans.
No wonder the Director General of the Budget Office, Ben Akabueze, said trouble is imminent while reacting to the Nation’s debt figure.
Abakueze addressing members-elect of the 10th National Assembly at their week-long induction ceremony in Abuja on Wednesday pointed out that while Nigeria remains healthy with its debt-to-GDP ratio, the Country is not with its debt-to-revenue ratio.
“Even on the African continent, the spending ratio is about 20 per cent. South Africa is about 30 per cent; Morocco is about 40 per cent. And at 15 per cent, that is too small for our needs. That is why there is fierce competition for the limited resources.
“That can determine how much we can relatively borrow. We now have minimal borrowing space, not because our debt to GDP is high, but because our revenue needs to be more significant to sustain the size of our debt. That explains our high debt service ratio. Once a country’s debt service ratio exceeds 30 per cent, that Country is in trouble, and we are pushing towards 100 per cent, and that tells you how much trouble we are in”, he said.
On a similar ground, Dr Muda Yusuf, the Director of the Centre for the Promotion of Private Enterprise, CPPE, cautioned against additional loans for expenditure by the federal government.
The warning signal resonated more as Nigeria battled to raise annual revenue of 10 trillion in 2022, almost swallowed by debt servicing payments.
Dr Ayo Teriba, the Chief Executive Officer of the Economic Associates, called for a switch to equity financing rather than asset financing.