Are you following the news? That Nigeria will borrow a staggering N12 trillion in two years and effectively push the country’s public debt stock at an overwhelming N50 trillion. Since this information came to the public through the media, a lot of questions has come up on the implication of the Muhammadu Buhari-led government penchant for borrowing.
But a question is conspicuously missing. And that is, how does the country’s growing debt affects you. Although, government borrowings are not directly tied to citizens but the truth is that, debts incurred by a nation is a burden to be shared by the entirety of the population.
If that is the case, then Nigeria’s growing debt is bound to have an effect on you. Unfortunately, the manner in which Nigeria’s debt standings is conveyed to the general public is obscure and deceitful. That is why you will see those trying to portray an image of all is well measure Nigeria’s public debt with the Gross Domestic Product (GDP).
By all measures, this is faulty and a deft attempt to keep the right information away from the public. GDP is the aggregated measurement of economic activities in the country and as such, reflects not only what goes to government but also the private sector too. In as much as debts incurred will be repaid from its earnings, it is not, in my estimation, appropriate to measure its debts with the market value of all final goods and services produced in a country in a given year, which is the GDP.
Every year, Nigeria government prepares a budget, which is mostly based on the assumption that a certain amount of money will be made. Whenever it spends more money than it brings through income generating activities, such as crude oil sale and taxes, it is done through borrowings.
What this simply implies, is that the more deficit in an annual budget year, the higher the country’s debt stock increases. As at the third quarter of 2021, Nigeria’s public debt stock stood at N33.1trillion. That shows a significant spike in the country’s debt profile because just six years ago, Nigeria was indebted to creditors to the tune of N12trillion. Out of the N33.1trillion, the federal government owed N26.91trillion, which was N9.8trillion in 2015 when Goodluck Jonathan left office.
Let us get something clear here, borrowing is not really a bad thing. It only become a source of concerns when substantial part of it went to the funding of public consumption, such as payment of salaries, social investment schemes, among others. And that has been the pattern we have seen so far in the past six years of the Buhari government.
To get this, take a look at the budget deficit recorded over the period and compare them to the capital expenditures within that time. According to the Budget Office, Nigeria’s budget deficit recorded in six years stood at N20.69trillion but all that went to capital expenditure receipts in that period is in the region of N8trillion, going by updates provided by the Finance Ministry.
What this goes to show is that the consistent excuse of infrastructure for accumulating debts is not backed by the numbers, because clear enough, more than N12trn, which is about 58% of borrowings incurred by the government, went to funding consumption. But that is not the only issue here, the thing with this pattern is that the Buhari government is constraining future revenue prospects.
And this is manifesting already especially when you listen to Buhari’s Finance Minister, Ahmed Zainab, on her justification for the government to go for more borrowings to fund the 2022 budget. “If we just depend on the revenues that we (Nigeria) get, even though our revenues have increased, the operational expenditure of government, including salaries and other overheads, is barely covered or swallowed up by the revenue,” she had told journalists at the State House in Abuja.
What she however failed to tell us, is the implication this borrowing spree bode on future earnings. At the moment, Nigeria uses more than 80 per cent of her earnings to service debts and the frightening thing is that, the portion that goes to creditors every year could go out of control with the reckless attitude of this government to borrowing.
Fitch Ratings, world’s major credit rating agency, provided an insight into what the future holds for Nigeria’s revenues, projecting that the country’s debt-to-revenue ratio could reach as high as 395 percent in 2022. That is staggering and disturbing. Nigeria is not only having a revenue crisis but now on the verge of yet a debt crisis.
This has a feature of Argentina’s debt crisis and reminiscent of the pre-2005 debt crisis faced by the country. And both experiences did not only weigh on their respective economies but directly affect people in some ways. The more government borrows, the more obligation to service them, which will definitely come from earnings and in turn, limit the amount of money available to fund education, healthcare, among other important services to public, hence, bring about gradual decline in standard of living.
Steady rise in inflation is another feature of an uncontrolled debt binge and as a person, this affects you directly. Price of food items, cost of transportation and other essential needs, go up every now and this is because growing debt is likely to increase the rate of treasury securities available to businesses. Although, the pain of excessive borrowing will be more felt by the unborn generations but in the present, you will not be exempted, and already, you’re feeling the effect, which is why you should show interest and ask questions.
Ibrahim Sarafa writes from Osogbo, Osun state and a member of PDP RESCUE HOUSE.