Regardless of what the current managers of Nigeria’s economy will have the nation and its citizens believe, these are not the best of times as the debt profile continues to soar amid dwindling revenues. Should Nigeria be a corporation, the next available option is to file for bankruptcy. Nigerians were understandably alarmed to find that debt service costs exceeded revenues by N310 billion in the first quarter of 2022, clearly indicating that Africa’s most populous nation may be experiencing a debt crisis.
We recall with a sense of doldrums that while the nation’s total spending for 2022 was estimated at N17.32 trillion, by the end of April when revenues of N5.77 trillion were expected, the nation reportedly reported N1 as retained earnings received from the government. 63 trillion. During this period, actual government spending amounted to N4.72 trillion; N$1.94 trillion for debt servicing and N$1.26 trillion for staff costs, leaving only N$773.63 billion for capital expenditures.
According to the Debt Management Office (DMO) report, the country’s total government debt stock was N41.60 trillion by the end of the second quarter of 2022. More recently, the International Development Association, an international financial institution that is also a member of the World Bank Group and offers concessional loans and grants to the world’s poorest developing countries, ranked Nigeria fourth in the list of the world’s most indebted countries.
IDA’s financial statements revealed that Nigeria is the fourth most indebted country with a debt of US$13 billion as of June 30, 2022. Of course, the latest ranking showed the nation has moved a step further from the previous fifth place it held in 2021. It must be noted that the IDA debt is distinct from the $486 million owed to the International Bank for Reconstruction and Development (IBRD).
Significantly, in our opinion, the IDA top 10 list, which ranks Nigeria fourth, includes India, Bangladesh, Pakistan, Vietnam, Ethiopia, Kenya, Tanzania, Ghana and Uganda. Without fear of contradiction, the nation is in dire straits and no amount of assurance from government, particularly the Debt Management Office, can erase that fact.
With inflation rising and the cost of living rising, which has pushed many into poverty, falling revenues and a rise in debt service, the IDA’s latest report is very worrying to say the least and clearly suggests that urgent action must be taken to stop the nation from falling further into the debt trap.
Is the current spending trend sustainable? Shouldn’t the government drastically cut spending, including the salaries of political officials? According to this newspaper, the time has come for the nation to question its sources of debt and, ultimately, to reconsider the use of borrowed funds. This implies that, without resorting to political considerations, a concrete decision must be made, and very quickly, on the gasoline subsidy, which remains one of the country’s biggest revenue hogs. In fact, the gasoline subsidy is not sustainable.
Without wishing to sound alarmist, we dare say that the situation looks bleak. The Lagos Chamber of Commerce and Industry (LCCI) succinctly summed up the scenario when its Chair, Michael Olawale-Cole, stated: “There are already concerns that most, if not all, of the assumptions in the Medium-Term Expenditure Framework (MTEF) 2023 – 2025 will be missed as we continue to experience unprecedented disruptions to supply chains and agricultural production.”
It must be said with some finality that hard times like these require the government to embark on reforms that will revive the evidently struggling economy by providing vital infrastructure, creating jobs, addressing the deplorable security situation and genuinely working on relief of operations are working to empower investors. Trust. In addition, the government must consolidate efforts to diversify the economy.
We are unaware of the fact that tremendous spending is being expended to meet the raging security challenge threatening the nation. It is unfortunate, if inevitable, that enormous resources that should have been devoted to strengthening much-needed infrastructure are being expended on security.
However, more than ever, the government must be willing to spend more on productive infrastructure and resist the urge to squander borrowed money to subsidize consumption. We make it clear that borrowing does not hurt. Much depends on what the borrowed money will be used for. There must be a positive shift in direction if the government is serious about saving the nation from an avoidable economic crisis. Time is of the essence.