Earlier this week while delivering a speech during the 3rd National Treasury Workshop organised by the Office of the Accountant General of the Federation, former CBN Governor, Sanusi Lamido, declared that Nigeria is “bankrupt and the country is heading to bankruptcy”.

As expected, the media space was set agog by Sanusi’s utterance, even as Nigerians reacted with the respective biases.

To say the least, the question on everyone’s lips is if Nigeria is indeed bankrupt or broke? Here are some insights into Sanusi’s claims that may further affirm that Nigeria is on the threshold of bankruptcy.

Nigeria’s rising Debt and Cost: Data obtained from Nigeria’s Debt Management Office (DMO) as at the end of 2018 shows that the country’s public debt (domestic and external) stood at a whopping N24.3 trillion. This is about 19% of the country’s Gross Domestic Product.

  • Nigeria’s rising debt has attracted wide criticisms both locally and internationally. For example, earlier this year the International Monetary Fund (IMF) questioned Nigeria’s ability to repay its N24.39 trillion debt.
  • The IMF also expressed concern about the rollover risks, arguing Nigeria’s capacity to refinance debt might drop in the future. Meanwhile, the Federal Government has since rebuffed such claims, stating that the nation’s debt burden is sustainable.

[Also Read: IMF questions Nigeria’s capacity to repay N24.3 trillion debt]

However, the cost of servicing such debts has become worrisome in recent years. Analysis of data obtained from the budget office and DMO reveals the following:

  • Nigeria spent the sum of N2.16 trillion for service debts in 2018
  • The cost of debt service rose by 2.16% between 2017 and 2018
  • In the last four years (2015-2018), Nigeria spent a whopping N6.46 trillion to service debt.
Emir Sanusi and Buhari, CBN, Central Bank of Nigeria
Emir Sanusi Lamido and President Muhammadu Buhari

Some recent claims: Recently, the African Development Bank (AfBD) revealed that Nigeria spends more than 50% of its revenue on debt servicing. The president of the AfDB, Akinwunmi Adesina, revealed this while speaking at the annual general meeting of AfDB in Malabo, Equatorial Guinea.

[Also Read: Nigeria spends 50% of its revenue on debt servicing]

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While the Accountant General of the Federation, Ahmed Idris recently admitted that Nigeria’s debt servicing is worrisome, he was quick to dismiss the report that servicing the country’s debt at the rate of over 50% of the total national income will destabilize the economy.

Fact check: According to the report from AfDB, the debt service rate of over 50% of Nigeria’s revenue is indeed damaging. A cursory look at Nigeria’s debt and revenue becomes quite fundamental.

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  • Nigeria’s debt service in 2018 was N2.16 trillion, while Government revenue stood at N3.96 trillion
  • Total debt service in four years stood at N6.46 trillion, while the country’s revenue for the same period was estimated at N12.32 trillion.
  • Hence, in 2018, Nigeria’s debt service is 54% of the total revenue.
  • In the last four years, Nigeria’s debt service gulps 52% of the total country’s revenue.

Based on the foregoing, it is crystal clear that in order to fund Nigeria’s N8.83 trillion budget, the country will have to borrow a lot of money. This only affirms Sanusi’s claims. Just recently, the Former Minister of Budget and National Planning, Senator Udo Udoma, stated that the Federal Government of Nigeria will borrow N1.6 trillion this year to fund the budget.

[Read Also: Nigeria to borrow N1.6 trillion to fund the 2019 budget]

Subsidy gulps Trillions: Again, the Emir Sanusi was critical of the Buhari Government’s continued payment for fuel subsidy which is gulping trillions of naira. Interestingly, the Buhari camp moved against a similar subsidy payment during the former administration of Goodluck Jonathan.

“What is more life-threatening than the subsidy that we have to sacrifice education, health sector and infrastructure for us to have cheap petroleum? If truly President Buhari is fighting poverty, he should remove the risk on the national financial sector and stop the subsidy regime which is fraudulent.” – Emir Sanusi

To establish Sanusi’s claims, it has been revealed that Nigeria spent N11 trillion on outstanding subsidy claims in the last six years. Recently, the committee headed by Senator Kabir Marafa approved the payment of N129 billion as outstanding subsidy claims to 67 petroleum marketers. It can only get worse if urgent action is not taken.

To say the least, the banking sector is also bearing the brunt. Much has been said of non-performing loans threatening the Nigeria banking sector. However, a look into bank loan data obtained from the Nigeria Bureau of Statistics (NBS) shows that Nigeria government loan portfolio from banks is estimated at a whopping N1.36 trillion as of April 2019. On the chart, the Government loan portfolio ranks third, just after Oil and Gas and Manufacturing sectors.

But is Nigeria Bankrupt? By definition, being bankrupt is a state of being legally unable to pay once debt as and when due. While bankruptcy is the legal process of declaring this debt and how creditors will be paid. Nigeria is nowhere near bankruptcy by this definition.

However, Sanusi is right after all: Without gainsaying the fact, Nigeria is on the verge of bankruptcy if it continues on this economic pathway.  The government has not done enough to demonstrate how it intends to grow its revenues enough to cover for its rising debt service. Whilst it focusses on dishing out government handouts, bailouts, and subsidies, it hasn’t presented cogent plant of boosting its revenues.

[Read: Sanusi declares Nigeria under Buhari “Bankrupt”]

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