Many Nigerians are worried over the increasing spate of borrowings by the federal government which could lead the country back into another debt trap

By Anayo Ezugwu

The rising debt profile of the federal and state governments in Nigeria have continued to be a source of worry to economic experts in the country despite assurances by the Debt Management Office, DMO. As a result, economic experts have warned the government that increase in borrowings could land the country into another debt trap.

This is as a result of the DMO statistics, which showed that the nation’s debt profile rose by 3.01 percent in the last six months. The DMO attributed the increase to the $2.5 billion Eurobond issued by the federal government in February.

“The Total Public Debt which encompasses the domestic and external debt stock of the federal and 36 State governments and the Federal Capital Territory stood at N22.38 Trillion or USD73.21 billion as at June 30, 2018. This figure was a marginal increase of 3.01 per cent over the public debt stock for December 2017. The increase in the public debt stock over the six months period was due largely to the $2.5 billion Eurobond issued in February 2018.

“When compared to the Debt Data for March 2018, the Public Debt Stock actually decreased by 1.44 per cent from N22.71tn in March 2018 to N22.38tn in June 2018. The decrease was due to a 3.38 per cent decline in the FGN’s domestic debt stock between March and June 2018. There were, however, marginal increases of 0.07 per cent in the external debt stock and 2.75 per cent in the domestic debt of states,” it said.

According to DMO, a major highlight in the public debt data was the consistent decrease in the FGN’s Domestic Debt which declined from N12.59tn in December 2017 to N12.58tn in March 2017 and N12.15tn in June 2018.

Expectedly, not many Nigerians are convinced that the country should literary continue its borrowing streak. Economic experts, who spoke to Realnews said the country should a review its borrowing plans. Sheriffdeen Tella, a senior lecturer in the Department of Economics, Olabisi Onabanjo University, Ogun State, said a highly dependable government should run a balanced budget and avoid borrowing.

He noted that borrowing in itself is not a bad economic strategy, but the way in which such borrowing is used is very important. “I’m not worried about borrowing because debt is leverage but it depends on what the loan is used for. It must be used for productive purposes and not to finance recurrent expenditure. Oil prices are just beginning to bounce back and so I see the borrowing as a last resort to prevent the total collapse of the economy since we had a serious revenue shortfall. When you have a decline in revenue, you have to resort to borrowing,” he said.

Tella described the argument that the nation’s debt to GDP ratio is low hence the motivation to keep borrowing as lazy.  “It’s a very worrisome development and we should not encourage it at all. My candid view is that the National Assembly should stop the federal government to continue to borrow. Because we have gone beyond the bounds, we should start thinking of how to begin to repay what we owe so that the debts burden and debt servicing will reduce ultimately from our budget.”

On his part, Austin Nweze, lecturer, Pan-Atlantic University, Lagos, and economic analyst, expressed fear that that most of the money borrowed by this administration might be diverted to funding electioneering campaigns. According to him, the nation has not seen where these monies are going.

“This government has been a freewheeler when it comes to borrowing. There is nothing wrong in borrowing but when you borrow to consume, it is dangerous. Consume in terms of paying salary and maintenance. We should borrow to build infrastructures. We have to really understand the geo-politics of borrowing. What these countries do is to make cheap loans available to you and you collect it knowing that African nations not just Nigeria are gullible. Once you offer them cheap loans they fall for it.

“The Chinese are doing it and it is giving them access to where they are not supposed to have access to. The same thing with the western nations. That is just the thing because if you understand the politics of loan you will know as a leader that there is no free money anywhere. They come with conditions you may not be able to meet,” he said.

According to Nweze, most of the money the federal government is planning to borrow to finance 2018 budget might go into debt servicing. “If you check the pattern, over the years, there is always more borrowing during election years. And they use these monies to intimidate the masses.

“First of all, they mop up the money in circulations so that people will find it really difficult to make money as it is today. Then when the election comes they will now begin to buy votes with the money. So when one person is paying N5000 and another person offers you N10,000 to vote, what will you do?

“It is a deliberate thing to impoverish the people and take advantage of the poor and there is nothing more criminal than election corruption. Election corruption in the sense that you corrupt the whole system, it is worse than financial corruption. The problem is that most of the money they are borrowing now would go for debt servicing. So it keeps piling and at the end of the day, the children unborn will have between N1.5 trillion and N3 trillion debts on their neck. If they keep on going the way they are going, there will be problem in the future,” he said.

– Oct. 5, 2018 @ 15:52 GMT |