NIGERIA’S debt profile will for a long time remain on the front burner of public discourse for obvious reasons. Besides attracting an increasing cost element in budgetary provision due to the burgeoning debt service cost, there is the difficulty in the foreseeable future of ever exiting the debt trap because of the decreasing amount of revenue available to the government as a result of declining sources of revenue, chiefly crude oil price which is Nigeria’s main source of revenue.
Only yesterday, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, said the nation’s external and domestic debts are projected to hit N38.68 trillion by December 2021. This represents an increase of about N7.67trillion from its N31.01 trillion level it had attained as at June 30, 2020.
Going by her projection, Nigeria will be adding on the average, about N426 billion monthly to her debt stock. That is a staggering figure by every standard.
At the moment, Nigeria (and this is true for nearly all oil producers under the OPEC cartel arrangement), relies substantially (about 90 per cent, or above) on oil resources for revenue generation.
The quantum of oil the nation produces and the price at which it is offered for sale at the international spot market, are beyond Nigeria’s control.
These are largely regulated by (OPEC), the Organisation of Petroleum Exporting Countries. So from time to time, Nigeria’s foreign exchange revenue is largely moderated by external factors, save for the additional funds that come in from non-oil exports.
Over the past few months, Mrs. Ahmed has been vociferous about the need for Nigeria to firm up her revenue generation drive, saying for those who cared to listen, that Nigeria’s problem was more of revenue generation than debt overhang.
On the strength of that argument, she has consistently insisted that Nigeria will not pursue any debt rebate, or forgiveness option, as doing so, she pointed out, will jeopardise Nigeria’s chances of securing more debts, or loans.
Don’t forget that debt servicing alone has taken a better part of 25 per cent of the Appropriation Bill. Curiously, arrangement for the repayment of the principal sum is not yet in view.
On the balance, the scare that Nigeria’s increasing debt profile has raised is obvious for all to see. Nonetheless, some have argued and that quite correctly that debt accumulation, or borrowing is part of the rule of the game. There’s no question. However, there’s a proviso and that is, that debts when incurred, of the larger must be ploughed into projects that will over time, repay the loans.
Is that the case in Nigeria?
While Mrs. Ahmed is still convinced that the loan option is her solution to Nigeria’s exit from her numerous problems, it will be a welcome development for her and in the larger interest of the populace to give a thought on ways and means Nigeria should adopt to exit the debt mantra as Nigeria’s revenue profile does not support an endless reliance on borrowing for whatever purpose. The time to act is now.