As President Muhammadu Buhari and his All Progressive Congress (APC) party continue to celebrate their victory at the February 23, 2019 general election, it is instructive that the president initiates urgent but sure footed measures and strategies to tackle the nation’s economy which appear to be at its worst state in the last one decade.
The renewal of the President Buhari mandate presupposes that the era of blame game is over. The challenge of the second and final phase of the Buhari era should be on how to rejuvenate the nation’s economy. This should be the anchor for every other development strides in the next four years of his administration. The many rhetoric which come with electioneering campaigns have come and gone. The president has a long time from now till May 29, 2019 to assemble a more functional cabinet capable of delivering on the promises of taking Nigeria to the next level in positive terms
The worst thing that any regime of leadership could do is to commit to acts and or omission which could be tantamount to mortgaging the future of generations yet unborn. There was even a condition attached to the pronouncement in the holy book where it was declared that the sins of the father would be visited on subsequent generations.
We therefore view with great concerns the mounting debts over hang on Nigeria nation, a development which tends to question the capacity and competence of the current managers of Nigeria’s economy.
Coming after Nigeria celebrated her exit from the stronghold of her creditors and subsequent economic recession, it is worrisome that the country is again sliding dangerously into another round of economic bondage occasioned by high but avoidable debt to Gross Domestic product (GDP) ratio.
The worry occasioned by the increasing debts is on the discovery that Nigeria is not borrowing for production but for consumption infrastructure upgrade. This is the biggest shock for an economy which harbours a population of over 180 million people thus presenting a huge market for any strong production base.
Nigeria’s debt profile has skyrocketed to N22.7 trillion mark with domestic debt accounting for 80 per cent. The obvious implication of the high domestic debt profile is that the government has ostensibly succeeded in crowing out the private sector from sourcing the much needed funds for their operations. Where such funds were available, the cost of sourcing them has remained so high that only the government could afford it. The Debt Management Office (DMO) was uncomfortable in reporting that both domestic and foreign debts have maintained an upward swing in the last four years covering the first leg of administration of President Muhammadu Buhari.
We associate ourselves with the alarm raised by both the Nigerian Employers Consultative Association (NECA) and Manufacturers Association of Nigeria (MAN) in reaction to the third quarter 2018 debt statistics released by the DMO as well as the seemingly faulty assumptions’ of the 2019 national budget which made unrealistic forecast for the nation’s daily crude oil production as well as the cost of the oil at the international market.
Not wanting to be condemned for failing in its oversight functions, the senate Committee on Foreign and Local Debts had expressed worry over the rising foreign debt profile of the country. The committee had challenged all well meaning Nigerians to condemn the development to avoid what it described as re- colonization of Nigeria. The committee for want of a stronger word had described the rising debt profile as a very dangerous trend to the nation’s economy
By the close of 2016, Nigeria’s debt was a little over N16 trillion, an increase of N4 trillion over the 2015 figure. For the 2019 financial year, the federal government plans to borrow about N1.6 trillion from the domestic market for the purpose of funding the budget. In 2018 FG sent N1.8 trillion in servicing debts. The figure spent in servicing debt in 2017 was N1.8 trillion. Of this amount, a total of N1.4 trillion went in domestic debt servicing while foreign debt collected N181.4 billion as service charge, a confirmation that the administration sent 2 per cent in debt servicing. The same government allocated N2.2 trillion in servicing debts. There is an obvious fear that the 2019 election spending will notch the nation’s debt profile much higher.
We declare, at the risk of raising a presumptuous alarm that there is nothing absolutely wrong in a nation indulging in borrowing whether from the domestic or foreign donors except in such instances as in Nigeria where the bulk of the borrowed funds were never channeled into wealth creation but on image laundering indulgencies. High debt has not been confirmed as a barrier to economic growth among developed nations considering that such monies are religiously channeled into productive ventures.
Unfortunately this appear not to be the case for Nigeria when government officials are busy plotting criminally ingenious ways of making more money for a government whose appetite for consumption rather than production is condemnably high. It is therefore not surprising that the authorities at the Federal Inland Revenue Service (FIRS) are working hard on jacking up taxes. The authorities must be reminded of the elementary economics which instructs that as the federal debt increases, the government will send more of its budget on interest costs, increasingly crowding out public investments. As economic growth improves, interest rates are likely to rise, and the federal government’s borrowing costs are projected to increase remarkably.
When borrowing costs are low, it can be desirable to borrow than to raise taxes. Economic growth tends to reduce the real debt burden. Over a time, economic growth and inflation tend to reduce the real burden of mortgage payments where such exists.
For the sake of emphasis, it should be noted that delayed social security, rising interest rates, difficulties in investing, tax payers paying the burden of a recession that extends across nations are some of the ways that national debt can impact negatively on the economy. For business and trade to be strong, the national debt must not be high as it is the case for Nigeria.
We align forces with analysts who insist that the current high appetite for borrowing on the part of government is an indication that all is not well with Nigeria’s economic for now and indeed, for the future. Getting the nation’s economy working again should be the major focus of Buhari’s administration in the next four years if he wants Nigerians to accept that his Next Level mantra was conceived in the positive trajectory.
There is no reason for the various state governments to be in competition with the federal government in the chase for both foreign and domestic loans where the purposes for such funds are known to be founded along political considerations. The 36 states and the Federal Capital Territory are known to have accumulated debts in excess of N4.5 trillion with no concrete investments to show for it.
We condemn in strong terms, government’s continuous resort to non ingenious ways of solving economic problems which is what the continual resort to borrowing points at. There is every need for the government to make recourse to the relevant provisions of the Fiscal Responsibility Act of 2007 as it relates to the framework for borrowing, debt management and the limits on consolidated debt of both the states and the federal government. The next level in the Buhari leadership should be on how best to re-tool the nation’s economy.
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