• Ex-Anambra gov laments ‘no corresponding visible usage, impact’ of loans
• Forex alone not determiner of high commodity prices, says expert
The Labour Party presidential candidate in the 2023 general election, Peter Obi, yesterday, joined observers and analysts of the Nigerian economy in proffering solutions to the nation’s “disturbing” N97.3 trillion debt profile.
“I remain concerned about our borrowings, considering their galloping situation over the years, and their concomitant effects on the economy. More worrisome is the fact that there has been no corresponding visible usage or investments as required by the law, to show their impact on the nation,” Obi wrote on his X handle yesterday.
He, therefore, appealed to the President Bola Tinubu government “to please de-accelerate the borrowing, and let us first re-evaluate; to see what has been achieved with our previous loans so far, and be able to make better decisions for the good of the nation.”
The former presidential aspirant promised: “In the New Nigeria of our dream, our scarce resources will not only be duly accounted for but will be productively and prudently managed in moving our nation from consumption to production.”
He noted: “At the end of the second quarter (Q2) of 2023, our debt stood at N87.9 trillion, which was very disturbing to us, because we were at a loss on what we did with the huge debt, especially the over N30 trillion Ways and Means borrowed by the last administration, which, for me, would have been the end of borrowing without any visible and corresponding investment that will benefit the nation.
“Even more worrisome is that between the end of Q3 and the end of Q4 of 2023, about N10 trillion was added to our debt profile, which has now taken our debts to N97.3 trillion, again, without any corresponding visible and verifiable utilisation of such debts, to the and best of my knowledge, is the highest ever borrowed in one quarter.
“Last year, 2023, our total debt servicing for domestic debts stood at N4.4 trillion and that of external debt servicing was $3.5 billion, which is about N4.9 trillion. In effect, approximately N10 trillion is now set aside to service unproductive debts.”
Obi added: “The implication is that what we borrowed in a quarter, about N10 trillion, and what we spend on debt servicing, which is also about N10 trillion, are each more than the combined budgetary allocation for the four highest priority areas, which are: defence (N3.25 trillion), education (N2.18 trillion), health (N1.33 trillion), and infrastructure (N1.32 trillion).”
Recent data by the Debt Management Office (DMO), released in its fourth-quarter report, indicates that as of December 31, 2023, Nigeria’s public debt stock stood at N97.341 trillion. This figure encompasses both domestic and external debts of the Federal Government, the 36 states, and the Federal Capital Territory (FCT).
The data reflects an increase of N9.43 trillion compared to the figure reported in September 2023. This rise is primarily attributed to new domestic borrowing by the Federal Government to partly finance the deficit outlined in the 2024 appropriation act, as well as disbursements from multilateral and bilateral lenders.
Tinubu
The total domestic debt amounts to N59.12 trillion, representing 61 per cent of the total public debt stock, while the external debt stands at N38.22 trillion, making up the remaining 39 per cent.
Nigeria’s external debt composition primarily consists of loans from multilateral lenders, accounting for 49.77 per cent; and bilateral lenders, accounting for 14.02 per cent, a total of 63.79 per cent of the external debt stock, with most loans being concessional or semi-concessional.
An economist, Percy Chukwuka-David, criticised the country’s current economic management, saying it lacks demonstrated strategies for rejuvenation. He highlighted the detrimental impact of over reliance on oil, even as he warned that political leaders are spending recklessly without proper control measures.
Calling for fiscal discipline in government expenditure, he noted: “International bodies, like the International Monetary Fund (IMF) or the World Bank, are strong enemies of Third World countries. Unfortunately, Nigeria has become a slave to them. They give us money and conditions that will keep us perpetually in debt bondage.
“Nigeria can call the bluff of these international lenders and work out strategies to turn our economy around. For example, we can refine our crude oil locally and service the whole of Africa with petroleum products and earn dollars limitlessly. There are opportunities in the agriculture sector yet to be tapped by the nation,” he said.
On his part, the founder and chief executive officer of Centre for the Promotion of Private Enterprise (CPPE), Muda Yusuf, said the debt figures were not unexpected. He cited securitisation of the N30million Central Bank of Nigeria (CBN) Ways and Means financing, which primarily addresses legacy debt issues, as a contributing factor to the increased debt levels.
He, however, added: “Progress towards fiscal consolidation in the past few months is salutary. This would put the government in a better position to deal with debt sustainability issues. The promise by the new CBN leadership to keep the Ways and Means financing within statutory limits is also reassuring.”
Meanwhile, another economist, Chijioke Ekechukwu, has explained that foreign exchange (forex) is not the only determiner of high prices of goods and services.
Ekechukwu, who is the Managing Director and Chief Executive Officer, Dignity Finance and Investment Ltd., disclosed this in Abuja, yesterday.
The naira has been fluctuating at the official market, trading between N1,300 and N1,240 to a dollar.
Ekechukwu, however, said the crash of the dollar being experienced currently at the official market might not have significant effect on the prices of commodities.
“Traders still have stock of goods bought at a high exchange rate. The naira only gained traction in the last two weeks. It is a short period, therefore, to ascertain stability. Fear of forex instability will also make traders retain old prices.
“Secondly, forex is not the only determiner of high prices. High cost of petroleum products such as diesel and petrol are major determinants. Scarcity of food as a result of insecurity in the north, where we have more farming activities, is also another determinant, among others,” he said.
He noted that prices of petroleum products are determined by external sources beyond the control of government. According to him, these are: exchange rate and global oil price.
“The global oil price is not controlled by Nigeria. However, if the government embarks on subsidy of petroleum products again, prices will come down. Petroleum products prices can also come down when our refineries start working optimally,” he added.
