FG’s $400m Loan: Political Interests Behind Nigeria’s Worsening Debt Profile, Says Economist

Nigeria’s worsening debt profile is caused by political interests and corruption, an economic expert has said.

A political economist, Dr Chukwuma Okoli, stated this on Monday in Enugu while responding to questions pertaining to the federal government moves to obtain $400m loan from the World Bank.

Our correspondent reports that the Tinubu administration had approached the World Bank for a fresh loan of $400m for the conditional cash transfer to 15 million households as one of the measures to cushion the effects of petrol subsidy removal on Nigerians.

The loan will bring to $1.2bn the amount that the FG is borrowing from the World Bank for the cash transfer as it had earlier secured a loan of $800m for the same purpose.

President Tinubu disclosed the conditional cash transfer to 15 million households in his address during the country’s independence on October 1 as part of measures to cushion the effects of the subsidy removal on petrol, which has led to an astronomic rise in the cost of living.

The payment of N25,000 monthly to 15 million households for three months will be from October to December 2023, he said.

Okolie said, “Nigeria’s debt profile is becoming a burden. This is because the political interest overrides everything. There are also personal interests. According to the Debt Management Office (DMO), Nigeria’s total public debt rose to N87.38 trillion in the second quarter (Q2) of 2023, recording an increase of 75.29 percent.

“We should also note that states owe in Nigeria’s over N87.38trn debt. Ten percent of the sum is owed by our thirty-six states and the Federal Capital Territory.

“Our debt servicing is scary. In the first quarter, about N1.3trn is used to service our debts. The nation’s oil revenue is about N1.trn. The opportunity cost is huge. Debt is a vicious circle – you borrow more to come out of the burden of already borrowed debts.”

Okolie said there is nothing wrong in borrowing, but Nigeria’s lack of transparency does not make borrowing profitable for the country.

He added, “The bane is lack of transparency and corruption. To make borrowing favourable, we should focus on where such funds could yield profits. These borrowings are factored in the budgets, and the budgets always balance.

“The truth is that Nigeria defies all social science theories because of corruption. This is the main reason why funds borrowed are not properly utilised. Projects they were meant to execute are not seen, and such funds have been expended. Nigeria has one of the highest project execution costs in the world, and the single cause is corruption.”

Okoli also spoke on the recommendation of the International Monetary Fund and the World Bank that taxes be imposed on Nigerians to sustain the economy.

He said, “Both bodies are created to sustain the global capitalist system. Their suggestions are anchored on liberal economy, which cannot help Nigeria. They encourage us to impose more taxes on the citizenry. IMF’s interests do not align with Nigeria’s model. Taxing the poor masses creates more poverty. IMF gives blind eye to our plight.”