Buhari May Leave Nigeria With N47.24trn Debt By 2023–Investigation

…Experts Warn Against Further Borrowing

Except the Federal Government comes up with more innovative ways of shoring revenue within the shortest possible time, the administration of President Muhammadu Buhari may leave the country with a debt burden of N47.24trn by 2023.

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The N47.24trn indebtedness is based on an analysis of the Federal Government’s borrowing plan as encapsulated in the Medium-Term Expenditure Framework/Fiscal Strategy Paper.

The preparation of the budget estimates for Ministries, Departments and Agencies usually takes into consideration the Medium-Term Policies/Strategies contained in the Expenditure Framework and Fiscal Strategy Paper which is the Federal Government’s pre-budget statement.

The MTEF/FSP outlines the development priorities of the Federal Government for the period covered.

Buhari had on September 24 at the 76th General Assembly of the United Nations monitored by THE WHISTLER asked the United Nations to consider expansion and extension of the Debt Service Suspension Initiative to include countries facing liquidity problems.

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He also begged the UN to cancel the debt of countries facing severe financial challenges.

Buhari had said, “On the issue of debt, we have seen that developing countries have been faced with unsustainable debt burdens even before the pandemic.

“The COVID-19 pandemic has increased the risk of a new wave of deepening debt, where vital public financial resources are allocated to external debt servicing and repayments at the expense of domestic health and financing for critical developmental needs.

“I must commend the current initiatives by the international financial institutions and the G20 aimed at significantly mitigating the economic situation of the indebted countries and urge for more efforts in this regard.

“Therefore, there is an urgent need to consider expansion and extension of the Debt Service Suspension Initiative to include all Developing, Least Developed Countries and Small Island Developing States facing fiscal and liquidity challenges.

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“In addition, a review of the eligibility criteria for debt suspension, including outright cancellation, is needed for countries facing the most severe challenges.”

The request by the President is linked with the current debt level of Africa’s largest economy.

But while the President is calling for outright debt cancellation, THE WHISTLER analysis showed that his administration has projected to borrow the sum of N14.328trn within a three-year period covering 2021 to 2023.

When this amount is added to the country’s debt burden of N32.92trn as of the end of December 2020, and with no plan of debt repayment in sight, it therefore implies that by 2023, the country will be left with a total indebtedness of N47.248trn.

A breakdown of the N14.32trn fresh borrowing showed that the sum of N7.164trn is expected to be sourced from the domestic debt market, while the balance of N7.164tn is being projected to be raised from foreign creditors.

Further breakdown of the N14.328trn fresh borrowing showed that the government will be raising N4.686trn in 2021, N4.892trn in 2022 and N4.75trn in 2023.

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Nigeria’s pubic debt stock in recent times had assumed an upward trend as a result of the drop in revenue generation.

For instance, the country’s debt rose by N20.8tn from N12.12trn as of July 2015 to N42.92trn as of the end of December 2020.

The Federal Government had repeatedly blamed the poor revenue performance of Ministries, Departments and Agencies for its increasing appetite for borrowing.

Findings showed that despite series of initiatives that have been implemented by the Federal Government to raise revenue, such had yet to yield the desired results.

For instance, between January 2015 and December 2018, the Federal Government recorded a shortfall of N2.22tn in independent revenue from its agencies captured under the Fiscal Responsibility Act.

In the 2020 fiscal period, the Federal Government recorded a revenue shortfall of N1.46trn as it generated an actual revenue of N3.9trn during the year, compared to its targeted revenues of N5.36trn.

The revenue shortfall of 27 per cent, according to experts, may have increase the amount of money borrowed by the government to finance its budget.

Speaking on the country’s debt burden, the Chairman, Chartered Institute of Bankers of Nigeria, Abuja Chapter, Prof Uche Uwaleke said the huge amount spent on debt servicing could pose great danger for the economy.

He said, “We are spending so much from our revenue to service debt and when that happens what is the implication? You have very little for what you want to do. If you have N1 expenditure, what it means is that you have 20 kobo for it. So, it counts out development of capital projects because that leaves you with very little and debt servicing you must do.

“That is why every year, government has not defaulted. Government will always service debt, so it leaves us with very little and that is why you see us more like in a perpetual state of borrowing.

“You will need to borrow to survive because as you earn, you are using it to service debt and so you will end up even refinancing. Refinancing means you borrow to service your debt. So that is our situation and I will say, the debt service to revenue ratio is really a problem and that is why sometimes you hear the Ministry of Finance say that we have a revenue challenge.”

He suggested thar since the government is not earning enough revenue, time has come for it to adopt a cost reduction strategy to bring down the cost of governance.

He added, “We are not earning enough, because if we are earning enough, the amount we are spending on debt service would not be an issue but because the revenue is not as big as it should, the little we are earning we spend on debt servicing. So it is a challenge.

“If you add the debt that the government is owing Central Bank over N10trn that tells you too that we have a higher figure. So, the debt stock is quite high, there is no doubt about that.

“My worry about the debt stock really is if you look at the composition, now going to what we should do, I think we should focus more on concessional loans. Loans form multilateral sources, World Bank, The International Monetary Fund, African Development Bank and maybe bilateral sources.
“When we are going for loans, we should focus on concessional rather than commercial debts.”

The Registrar Chartered Institute of Finance and Control of Nigeria, Mr Godwin Eohoi, said that with the Federal Government spending about 20 per cent of its budget size servicing the country’s debt, any further plan to increase the country’s debt profile may result into debt crisis.

He called on the government to discontinue borrowing in order to avoid the current situation where a huge chunk of the country’s annual budget is spent on debt servicing.

“Currently, what we are still doing is debt servicing using a huge proportion of the annual budget to pay debt. That is serious because the money that you would have used for other things is now being used to pay debt.

“The debt is still mounting and the servicing that we are doing is quite huge. We are using over 20 per cent of our budget to service debt.

“We should not even accumulate further debt beyond what we currently owe.”

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