- Nigeria’s rising debt and poor fiscal management have led to increased poverty, says Olufemi Aduwo, Chairman of CSO-African Countries Group of World Bank.
- In 2022, Nigeria’s debt reached ₦77 trillion, with the debt-to-GDP ratio more than doubling from 17.7% to 37.3%.
- Fiscal mismanagement, non-compliance with the Fiscal Responsibility Act, and a lack of fiscal discipline contribute to the debt crisis. The government often borrows for purposes beyond capital investment and human development.
The Permanent Representative of the Centre for Convention on Democratic Integrity (CCDI) to the United Nations Economic and Social Council (ECOSOC ), and Chairman, CSO-African Countries Group of World Bank, Civil Society Policy Forum (CSPF), Mr. Olufemi Aduwo, has said while many academic research may argue that increased borrowing increases GDP and household income, this is obviously not the case for Nigeria as it is clear from statistics and the faces of the masses that increasing government debt and loans have amounted to increasing poverty, which can only be attributed to the poor fiscal management in Nigeria.
Aduwo said this just as he returned from the World Bank/IMF meeting in Morocco recently.
- He said, “Since 2023 figures are fluctuating let 2022 be our guide. As of 2022, Nigeria’s debt reached an all-time high of NGN77 trillion. Over the past decade, Nigeria has experienced a notable surge in its debt levels. The debt to GDP ratio has more than doubled from 17.7% to 37.3% in 2022, and over 80% of the country’s revenue is being used to settle or service debt. “Spending over 80% on debt servicing leaves about 20% of the country’s revenue thinly spread across other sectors such as health, education, security, road and infrastructure, agriculture, social welfare, etc.”
- He noted that there are many factors fueling Nigeria’s debt crisis, the main one being fiscal mismanagement. “The Nigerian government lacks fiscal discipline. The Fiscal Responsibility Act of 2007 clearly stated that the government at all levels might borrow only for capital investment and human development. This Act has been flouted over the years and efforts to amend some ambiguities in the Act have not succeeded over the years.
- “For instance, the Act prescribes the inclusion of “borrowing for important reforms of major national importance. This is ambiguous and most often abused. The terminology is vague and increases the government’s borrowing power. The relevance of the Fiscal Responsibility Act is sabotaged by the lack of strict sanctions to enforce compliance,” he said.
Aduwo cited that the Fiscal Responsibility Commission, just like other oversight Agencies in Nigeria lacks sanction power and is poorly supported.
He said the existing fiscal structure in Nigeria somewhat promotes the lack of accountability, transparency and corruption.
Citing an instance, he said the Government Audit Reports from the Auditor General’s office are never made for public usage or access.
He stated that even the National Assembly and Presidency over the years have ignored this lack of transparency in public reports.
- “How do we fight corruption without public audit reports? The Fiscal Responsibility Act also requires that borrowed funds be managed in a separate account to allow for proper monitoring and a clean spell out of what the debts are used for. However, the norm has been to add the loans to the overall consolidated funds, without a clear public report on what capital projects are funded by the loans. It is sad that the only place where detailed progress reports of projects funded by loans, are the creditor websites, and never the Nigerian government or relevant MDAs public reports. There is nothing wrong in borrowing if the conditionalities are okay and the purpose for investment. Borrowing to pay salaries is anathema,” he stated.
Commenting on the falling value of the naira, Aduwo said the first reason, which is also the root cause of the naira depreciation, is that the supply of dollars into the economy has been declining while demand for dollars remains relatively unchanged courtesy of the country’s huge demand for dollars fuelled by dependence on imported goods for many economic activities.
He cautioned that devaluation makes a domestic currency less expensive than other currencies, which has two main implications, according to the International Monetary Fund (IMF). “First, devaluation makes the country’s exports relatively less expensive for foreigners.
- “Second, the devaluation makes foreign products relatively more expensive for domestic consumers, thus discouraging imports. This may help to increase the country’s exports and decrease imports, and may therefore help to reduce the current account deficit.
- “And in Nigeria’s specific case, the free float of the naira ended the Central Bank’s previous regime of foreign-exchange rationing for importers, which limited their capacities to obtain foreign currency, particularly to service their international debt and payment obligations. We note that most of the goods are imported,” he stressed.
Commenting, also, on debit forgiveness, Aduwo said Nigeria is not only indebted to the World Bank and IMF, but Nigeria borrows from China, London and Paris Clubs as well.
He recalled that in 1999 when democracy returned to Nigeria, the country’s total debts stood at $28.04 billion.
The figure dropped to $2.1 billion on the famous debt relief secured by President Olusegun Obasanjo. It went up to $7.3 billion under Dr. Goodluck Jonathan in 2015.
Under Buhari, the figure rose by as much as over 400 per cent to $41.8 billion.
In October 2005, Nigeria and the Paris Club announced a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria’s debt stock by $30 billion.
The deal was completed in April 2006 when Nigeria made the final payment and its books were cleared of Paris Club debt. “I doubt if such grace would ever be available to us again, for many obvious reasons,” he noted.
