It is not by any standard a palatable news report that the Federal Government made a total of N3.25tn in 2020, and out of which spent a total of N2.34tn on debt servicing within the year. This means, the report underlined, that 72 per cent of the government’s revenue was spent on debt servicing. It also puts the government’s debt servicing to revenue ratio at 72 per cent.
According to the report, a review of the budget performance of the 2020 Appropriation Act In 2019 shows that the Federal Government made total revenue of N3.86tn. Within the year, debt servicing gulped N2.11tn. This puts the Federal Government’s debt servicing to revenue ratio in 2019 at 54.66 per cent. This means that between 2019 and 2020, the Federal Government’s debt servicing to revenue ratio jumped from 54.66 per cent to 72 per cent. The report concluded.
Without fail, going by information coming from government quarters, this piece must as a background acknowledge that the chunk of debt currently serviced, was used to finance infrastructural development such as roads, rail and electricity. It is also aware that infrastructure enables development and also provides the services that underpin the ability of people to be economically productive, for example via transport. “The transport sector has a huge role in connecting populations to where the work is,” says Ms Marchal. Infrastructure investments help stem economic losses arising from problems such as power outages or traffic congestion. The World Bank estimates that in Sub-Saharan Africa closing the infrastructure quantity and quality gap relative to the world’s best performers could raise GDP growth per head by 2.6% per year.
With the above highlighted the questions that are important as this piece itself is; must the nation borrow in ways that mortgage the future of our nation? Have we as a nation forgotten that development is said to be sustainable ‘when it is achieved without excess socioeconomic environment degradation, but in a way that both protects the rights and opportunities of coming generations and contributes to compatible approaches?
Like apostle Paul queried in the Christian Holy Book-the Bible; so, shall we then continue in sin that grace may abound? Paul replies with a resounding “God forbid” (Romans 6:2) Likewise, this piece is asking our nation handlers; must we continue to borrow recklessly all in the nation of infrastructural development? Must we sacrifice our nation’s liberty and our children’s future on the altar of infrastructural development?
As the nation goes on borrowing spree and speeds on ‘borrowing lane’ in the name of infrastructural development, one may be tempted to ask; if we have forgotten that already, going by world Banks revelation that “almost half of the poor people in Sub-Saharan Africa live in just five countries: and they are in this order, namely; Nigeria, the Democratic Republic of Congo Tanzania, Ethiopia and Madagascar?
Can’t President Muhammadu Buhari led Federal Government appreciate the time-honoured aphorism which says that; no nation becomes strong/great by living on borrowed funds?
At this point, let’s situate what qualifies the present concern as not just a challenge but a crisis that all must worry about.
Recently, it was in the news that PricewaterhouseCoopers, a multinational professional services network of firms, operating as partnerships under the PwC brand, in a report entitled; ‘Nigeria Economic Alert: Assessing the 2021 FGN Budget.’, warned that the increasing cost of servicing debt will continues to weigh on the Federal Government’s revenue profile. It said, “Actual debt servicing cost in 2020 stood at N3.27tn and represented about 10 per cent over the budgeted amount of N2.95tn. This puts the debt-to-revenue ratio at approximately 83 per cent, nearly double the 46 per cent that was budgeted. This implies that about N83 out of every N100 the Federal Government earned was used to settle interest payments for outstanding domestic and foreign debts within the reference period. In 2021, the FG plans to spend N3.32tn to service its outstanding debt. This is slightly higher than the N2.95tn budgeted in 2020.”
That is not the only apprehension.
In 2020, one of the reputable national newspapers in Nigeria in its editorial comment among other observations noted that Nigeria would be facing another round of fiscal headwinds this year with the mix of $83 billion debt; rising recurrent expenditure; increased cost of debt servicing; sustained fall in revenue; and about $22 billion debt plan waiting for legislative approval. It may be worse if the anticipated shocks from the global economy, like the Brexit, the United States-China trade war and interest rate policy of the Federal Reserve Bank go awry. The nation’s debt stock, currently at $83billion, comes with huge debt service provision in excess of N2.1 trillion in 2019, but set to rise in 2020. This challenge stems from the country’s revenue crisis, which has remained unabating in the last five years, while the borrowings have persisted, an indication that the economy has been primed for recurring tough outcomes, the report concluded.
Today, such fears raised cannot be described as unfounded just as this author doesn’t need to be economists to know that as nation, we have become a high risk borrower.
Indeed, the question may be asked; why the country’s revenue crisis remained unabated in the last six years?
Within the context, the answer lies in the fundamental recognition that here is a country reputed for crude oil dependence and laced with management system devoid of accountability, transparency and accuracy. And before a real solution can be proffered, we need as a nation to find and understand the sources of the national problems without losing sight of the real and lasting meaning.
As an illustration, in 2020, the Nigeria Extractive Industries Transparency Initiative (NEITI), going by report state that the nation loses about $4.1 or N123 Billion annually due to poor crude oil production metering, stating that unless government takes appropriate measures, limitations in the metering of crude oil production will continue to pose serious threat to the nation’s revenue target. Regrettably, Nigeria is the only oil-producing country without adequate metering to ascertain the accurate quantity of crude oil produced at any given time, the report concluded.
What the above tells us as a country is that more work needs to be done, more reforms to be made; that as a nation, we are poor not because of our geographical location or due to absence of mineral/natural resources but because our leaders fail to take decisions that engineer prosperity. And we cannot solve our socio-economic challenges with the same thinking we used when we created it’
Definitely, this piece may not unfold completely the answers to these challenges, but there are a few sectors that a nation desirous of development can start from. The first that comes to mind is the urgent need for diversification of the nation’s revenue sources. Revenue diversification from what development experts are saying will provide options for the nation to reduce financial risks and increase national economic stability: As a decline in particular revenue source might be offset by increase in other revenue sources.
Finally, within this period of economic vulnerability, a new awareness that must not be allowed to go with political winds is the expert warning that ;’Accumulated debt can hinder a country’s development, especially when most of the revenue generated is used to service debt. When money that should be used to pay salary or cover the cost of capital infrastructure is used to pay debt, people are affected as they don’t have enough money to spend. So, when huge amount is used to service debt, there is no way capital development can happen, and this affects the people and the country generally,”
Utomi is the Programme Coordinator (Media and Public Policy), Social and Economic Justice Advocacy (SEJA), Lagos. He could be reached via;firstname.lastname@example.org/08032725374.