Nigerians are known to be heavy spenders. Profligacy is another name for Nigeria’s political elite. Whether it is in the United Kingdom, United States, United Emirates or South Africa, Nigerians are known to squander money irresponsibly. They have become notorious for their lavish and riotous birthday parties in these countries. Back at home, they are no less reckless in their extravagance. All these they do in the face of glaring poverty in the land. It is sad enough that our leaders have become leading squandermaniacs in the world but what is becoming worrisome is the fact that the current federal administration is treading a similar profligate path which its predecessors had, like the notorious elite, trod.
Indication of the present administration’s determination to tread this ruinous path was recently highlighted by its tenacious defence of the country’s continuously rising debt profile. Finance Minister, Dr Olusegun Aganga, marshalled the defence on behalf of the government. As at now, the country’s domestic debt is N3.8 trillion while its external debt stands at $4.3 billion. For many Nigerians, this state of indebtedness is not only outrageous but unacceptable and has therefore attracted scathing criticism from discerning observers. But the Federal Government seems unperturbed by the growing alarm. The government’s posturing was revealed by Aganga at the yearly conference of the Nigerian Economic Society held last week in Abuja.
According to the finance minister, “Nigeria has ample liquidity and low level of external debt … If you read the Fitch report recently, it appears that globally, we have one of the lowest, which does not mean we must continue to borrow.” Of course, Aganga’s explanation shows clearly that the government is not bothered about its debt problems. It is equally obvious that the government will continue to accumulate external debts because as at the time Aganga was speaking, the Presidency was piling pressure on the National Assembly to give it the necessary approvals to secure an additional $4 billion external loan.
Trying to rationalise government’s unpopular propensity for accumulating debts, the minister explained that the debts were not harmful. “If you look at the external debt, it is N4.3 billion and 85% of this debt is in the form of concessionary loans which means that these loans have a term of 30 to 40 years with 7 to 10-year moratorium period. Although the facts he presented cannot be faulted, his sincerity and the motives of his arguments are highly suspect and questionable because more than three times in the last two months, Aganga has used the relatively low external debt as a weapon to counter opposition to borrowing but has conveniently ignored the domestic debt overhang which has become so unwieldy that it is posing a threat to economic growth and stability. Such a colossal domestic debt profile, experts say, have a high potential to stifle the country’s economic growth. As Dr Ngozi Okonjo-Iweala stated emphatically a few weeks ago, Nigeria’s domestic debt is assuming dangerous proportions and poses a threat to the economy if it is not managed properly.
It is indeed a source of worry that Nigeria seems not to have learnt any lessons from the recent global economic meltdown. At a period when governments around the globe are embarking on harsh cost cutting measures, Nigeria’s government is still engrossed in a spending spree, wasting billions of naira on unjustifiable projects such as 50th Independence anniversary, purchase of presidential jets, increased pay for legislators and the like. It beggars belief that such wasteful spending is taking place at a time the British government is cutting cost to the extent that allowances to Queen Elizabeth II, the revered British monarch have been slashed!
It isn’t that our leaders have not been cautioned. Global economic bodies have been emphasising of recent that countries in sub-Saharan Africa which is the world’s poorest region need to begin taking bold steps to start reining in spending and reducing budget deficit. Head of IMF’s Africa Department, Mr Antoinette Sayeh said, “expansionary fiscal policies will need to be tampered with to make sure that public finances return to a sustainable path and public debt remains manageable.” Nigeria’s economic managers have been doing the opposite. They have been stretching fiscal irresponsibility beyond limits and justifying rising public debt.
To understand how wasteful our government has been, we need to remember that four years ago Nigeria had $22 billion in its excess crude account after it exited the Paris Club. Between that period and now it has generated some more billions but has squandered everything and, at present, it is heavily in debt.
One major reason there is opposition to external borrowing is the fact that the money borrowed is not utilised on projects that can generate economic returns. For instance, there is very little to show for all the billions we borrowed in the past thirty years for which we equally paid billions of dollars as interest. There is also no guarantee that the situation will change now. Why not stop the borrowing and make do with what we have? Since the beginning of this year, there has been much money coming in from excess crude. Remember that the benchmark for crude oil in the budget was $59 per barrel but oil has sold beyond $70 per barrel. Why not utilise that excess instead of borrowing?
The major implication of this unrestrained borrowing and spending is that the economy will take much longer than necessary to recover and get repositioned. We are borrowing when oil prices are still relatively high; assuming something happens to crash oil prices for the next two years; what will happen to Nigerians. If this period of relatively high unemployment is getting out of hand, what will happen if efforts by developed nations to avoid another round of meltdown fail? Since this is not impossible, should Nigerians not be extra careful and spend within our means and reduce borrowing to the barest minimum?
The time has come for government to show seriousness in economic management. This will involve prudent and quality spending on areas that will help develop other potential revenue generating sectors that will end our dependence on a single product. Then we can be free from the volatility of oil prices. We can also begin to develop our real sector rather than depend on imports for almost all our needs including refined petroleum! This is the greatest achievement our leaders can make and it should top the considerations for choosing our leaders in the forthcoming general elections.