By Ajibola Adedoye
In checkmating the increasing rate of
Nigeria’s debt profile, governments at all levels need to acknowledge the critical importance of formulating, implementing and monitoring fiscal policies that are technically sound, widely acceptable and administratively feasible.
Auwal Ibrahim Musa (Rafsanjani), Executive Director, Civil Society Legislative Advocacy Centre (CISLAC) made this submission in his keynote address at a media presentation in Lagos on Wednesday, May 3, 2024.
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CISLAC Executive Director noted that a major contributor to this menace is “Government’s overreliance on unsustainable debts which is perpetuated by unrealistic/over bloated budgets, weak revenue mobilization efforts, misplaced spending priorities and a lack of transparency and accountability in public finance management”.
According to him, “This alarming trend is evidenced by substantial shortfalls in revenue, with deficits ranging from 31% to as high as 50% in the years spanning 2018 to 2023.
“Concurrently, Nigeria’s overall debt burden has skyrocketed, reaching a staggering N97.34 trillion in the fourth quarter of 2023 from N87.9 trillion ($114.3 billion) as of June 2023. While Nigeria’s debt profile continues to grow, and it allocates most of its budget revenue to debt servicing at the expense of investing in more critical social sectors and infrastructural development” he stressed.
The CISLAC Executive Director who queried the sincerity of purpose behind external borrowings opined that “In November 2023, the Government signed a $2.8 billion supplementary budget that included funding for new bulletproof cars for the President and First Lady, a Presidential Yacht, and renovations of the President’s Residential Quarters amid a nation-wide cost-of-living crisis. This coincided with a Presidential request to the Senate for the approval of an external loan facility of $7.86 billion and 100 million euros.
“The Government has also mortgaged its crude oil reserves in Debt for future crude arrangements- Project Eagle in 2020 and the recent Afrexim “pre-export finance facility” worth $3.3 billion at an 11.85% per annum interest rate.
“Increasing role of private creditors in Nigeria’s debt crisis and its human costs. 37% of Nigeria’s total external debt figure is owed to private creditors and the government will spend six times more on servicing debts than on building new schools and hospitals in 2024.
“Non-objective assessment of debt sustainability using Debt-to-GDP ratio (which puts us at a moderate risk of debt distress at 41.15% despite being above the DMO’s self-imposed threshold of 40%) as against Debt-to-revenue ratio (which stands at 73.5% and still above the DMO’s 50% self-imposed threshold for 2023).
“Lack of accountability mechanism in utilization of loans for the purpose for which they were granted/taken. The 2020 annual audit report published by the Auditor-General of the Federation revealed there was no document to show the movement and spending of the $3.4 billion COVID-19 emergency financing package loaned to Nigeria in April 2020 by the International Monetary Fund (IMF). Compounding Nigeria’s fiscal woes are significant revenue losses attributed to tax expenditures, encompassing incentives, exemptions, credits, and waivers.
“According to the 2021 Tax Expenditure Statement (TES), revenue foregone due to tax expenditures accounted for approximately 4% of GDP, equating to N6.8 trillion. This substantial leakage of revenue underscores the urgency of addressing tax expenditure and debt management issues with utmost priority” he submitted.
In his remark, Mr. Victor Arokoyo representing Christian Aid UN Nigeria said
“Our organization is concerned with debt management in Nigeria particularly as they relate to capacity of providing social services. There’s ongoing interest in government taking more loans. Though we are not concerned with the loans taking by government but should be done in line with the provision of the law. We are beginning to see national and state government taking loans recklessly without taking cognizance of the rules of the country, physical responsibilities of the country.
“Loans are often without being utilized in the right channel. So we are more concerned on how we can reduce the issue of debt taking in Nigeria and of course, the first way is by increasing the revenue base of the government which will help reduce the amount of loan that will be taken.
“Secondly, if government is able to reduce unnecessary incentives given to private international
organizations, debt will automatically reduce. You cannot be given three trillion as incentives and still go out borrowing close to six trillion from international sources.
“We are partnering CISLAC to see how we can galvanized people to show more interest on this issue, so that they can start calling government into order, so that they can start deliberating on tax expenditure. They need to know what the country will loose given out unnecessary incentives to international organizations.
“We want citizens to be cautious of what happened around them. They are hardly concerned because less than 30% of tax payable citizens actually paid tax. Why increasing tax of those that actually pay tax, government need to deploy new strategy to make people pay tax regularly” he maintained.
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