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The International Monetary Fund had recently raised an alarm over Nigeria’s growing debt profile noting that it could be worse and needs to be carefully managed.

Data from the Debt Management Office puts the nation’s total foreign and domestic debt stocks as at September 2017 at $66.63 billion or N20.373 trillion.

The country’s debt profile for the Federal and 36 states showed a continuous rise in the last two years, growing from $10.718 billion in 2015 to $11.406 billion in 2016, hitting $15.352 billion or N4.693 trillion in September 2017.

Details of the proposed 2018 budget also show that the government intends to spend 2.01trillion will be spent on debt servicing.  

Tales of borrowings in the past

It would be recalled the Debt Management Office ( DMO) which was established to centrally coordinate the management of Nigeria’s debt recently listed $300 million Diaspora Bond and $3 billion dual-tranche Eurobond issuances at the Nigerian Stock Exchange ( NSE).

The agency explained that the $300m it had borrowed from Nigerians in the Diaspora was part of the $5.5bn approved for borrowing by the National Assembly.

According to DMO $2.5bn was approved for the part-financing of the deficit in the 2017 Appropriation Act. The Act makes a provision for new external borrowings of N1.068tn, an equivalent of about $3.5bn. Out of this amount, only $300m has been borrowed through the issuance of a Diaspora Bond in June 2017.

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The DMO issued a 100billion 7-year debut Sukuk Offer, the money raised is expected to be channelled towards the construction of some major highways across the country. The bond which was oversubscribed offered another window for the Government to raise funds to close Nigeria’s infrastructure gap.

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The DMO had indicated that funds would be utilized for the construction and rehabilitation of 25 Roads across the 6 Geopolitical zones and with the conclusion of the Offer, the Federal Ministry of Power, Works and Housing can now actively commence work

The DMO also listed an N10.6 billion Green Bonds, also known as Climate Bonds, to finance projects that have a positive impact on the environment and provide a solution to climate change.

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Getting Value from these borrowings

Twice in the last three decades, Nigeria has found itself in the critical situation of not being able to service or repay its domestic and foreign debt, with the potential of being declared, technically insolvent and bankrupt

According to the Director General of the Debt Management Office, Patience Oniha, the DMO’s strategy is to continuously restructure the Federal Government’s debt portfolio and replace short-tenured bonds with long tenor and high rates with lower.

But, has the agency been able to live to its responsibility of advising levels of government on how best to manage their growing debt profile? Have Nigerians benefitted from the plethora of borrowings in the past?

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These borrowings which are meant to finance critical infrastructure and capital projects and not on recurrent expenditures like payment of salaries in most cases the funds end in private pockets while the nation continues to suffer from infrastructural imbalance.

More worrisome is the fact that debt is now growing faster than the rate of Gross Domestic Product (GDP). When will Nigerians get a good value for all these borrowings?

Way Forward

The country’s attitude to borrowing is a national disgrace and this calls for re-orientation of our borrowing system. Nigerians are being misinformed to believe that borrowing is inevitable for economic growth. Whatever the likely benefits derivable from the huge internal borrowing, it is bound to have negative economic consequences on the citizens and future economic growth.

However, with the current economic realities, it is important that the government should initiate a comprehensive debt servicing plan. In designing the plan, the government needs to carefully re-examine the nation’s borrowing culture with its attendant consequences.

Leadership and corruption remain a hindrance to national success in the area of debt servicing. Of particular interest is the diversion of funds meant for debt servicing by people at the helms of affairs. 

While introducing checks and balances to reduce the nation’s domestic debts profile, greater attention needs to be paid to viable investment initiatives. If the government can ensure huge returns for private investors, the impacts will be better felt by all and sundry instead of continuous borrowing.

Irrespective of the present economic challenges, the government should stop paying lip service to the problem of national debt as this remains a major obstacle to national development.

The government should not continue to mortgage Nigeria’s future growth and prosperity on foreign loans that will impose a crushing burden on us. The next generation deserves better than a nation crippled by huge foreign debts.

Fikayo has a degree in computer science with economics from Obafemi Awolowo University. ITIL v3 in IT service management. An alumnus of Daystar Leadership Academy. Prior to joining Nairametrics had stinct in Project management, Telecommunications among others. Also training in Consulting and Investment banking from Edubridge Academy. He has very keen interest in Politics, Agri-business, private equity and global economics. He loves travelling and watching football. You can contact him via fikayo.owoeye@nairametrics.com

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