By Oludare Mayowa
By the time President Mohammadu Buhari will be handing over power to the next administration, he will have ramped up the nation’s total debt by more than 281.91 percent from what he inherited from his predecessor.
When the over N22 trillion Ways and Means overdraft from the Central Bank of Nigeria (CBN) is consolidated into the nation’s debt stock, the government of Buhari will have set Nigeria back by a 535.83 percent increase in debt stock.
According to the latest debt data published by the Debt Management Office (DMO) on Thursday, Nigeria’s total debt as of the end of December 2022 stood at N46.25 trillion, and this showed that the country’s debt stock has grown since the inception of President Buhari’s administration.
Data obtained from the debt office showed that the country’s total debt in June 2015, when this administration assumed power, stood at a mere N12.11 trillion, which has since grown by 281.91 percent when compared with the latest figure released on Thursday.
That also means that President Buhari has ramped up the country’s debt portfolio by N34.14 trillion in the seven and half years to December 2022.
Analysts said by the time the government will be handing over to the next president on May 29, 2023, he would be handing over close to N77 trillion in debt if the current efforts to securitize the short-term borrowing from CBN are successful.
That would also mean that the president would have ramped up the country’s debt by 535.64 percent or more at the expiration of his tenure in office.
However, it should be clearly stated that, though the bulk of the debt belongs to the federal government, also the sub-nationals contributed to the rapid growth of the nation’s total debt stock.
For instance, while the total debt of the 36 states and the federal capital territory amounted to N1.69 trillion in June 2015, it went up to N7.32 trillion by December 31, 2022.
Buhari’s administration’s legendary debt profile was also compounded by a shortfall in revenue from Nigeria’s main source of income, crude oil, which has fallen consistently due to increasing oil theft and pipeline vandalism in the oil-producing Niger Delta.
The surge in debt could also be attributed to the huge funding for the expensive fuel subsidy, which has grown in the last eight years of his administration and was further complicated by the rapid depreciation of the local currency.
The nation depends solely on the importation of fuel, the volume of the imported product has often been exaggerated by the state-owned oil firm, Nigerian National Petroleum Corporation (NNPC), which is the sole importer of the commodity.
The cost of the fuel subsidy has not been transparent with the NNPC pricing mechanism, and data on total fuel imported into the country remain subject of doubt and dispute by many stakeholders to this date.
The nation had also slipped into recession twice during the administration of President Buhari and has had to battle COVID-19, which slowed down oil exports and disrupted economic activities, resulting in a decline in revenue generation for the government.
However, despite the headwinds from revenue and currency crises, the government’s capacity to manage the economy was challenged by a lack of transparency in government finance and a penchant for borrowing for rail constructions, which has not really helped reduce dependence on road transportation.
Despite the economic challenges faced during his tenure, the government refused to cut down on the cost of governance, which shot up astronomically in the last eight years.
According to a professor of economics at the University of Uyo, Akpan Ekpo, who was quoted in a report by The Punch, “Those figures (debt stock) are worrisome because our revenue base is very low. I just hope the borrowing was for infrastructure and the government is transparent about what it was spent on.
“Those debts should not be on recurring expenditures because that is a waste. Borrowing to fill up the deficit is not good for our economy either. If it was spent on capital projects, can the projects pay the debts back?
“The debt is for future generations. We need to get information on the debt servicing revenue ratio or debt revenue because our revenue base is not healthy at all.”
Also, a professor of financial economics at the University of Uyo, Leo Ukpong, posited that the inability of the country to service its debt might lead to an increase in taxes.
“Borrowing tends to have a negative effect on the credibility of the borrower. Clearly, we know that public debt is very high, and this increase is not good for the country.
“When debts rise, you run the risk of bankruptcy, but since a country can’t be declared bankrupt, it is likely that taxes will be increased, which will reduce our purchasing power,” Ukpong said.
On his part, the Deputy President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, described Nigeria’s continued recourse to borrowing as worrisome for the economy.
“We are looking at external borrowing that is not tied to specific revenue-generating projects that are not collateralized.” For example, if you want to take a loan to build a port and be paid back from the operations of the port, you can still raise money.
“But if you want to borrow money and use it for various projects that do not generate income, hoping to pay from the federal budget, then you are not likely to make any progress,” Idahosa said.
There is palpable fear among the populace that the coming days are going to be tough for Nigerians as the incoming administration of President-elect Bola Tinubu will have to face the challenges of balancing the books.
Tinubu will be confronted with the choice of abolishing the expensive fuel subsidy and raising public sector wages to cushion the impact of the withdrawal of the subsidy while also thinking of more debt to ensure the running of government business.
Analysts said the incoming administration will have to resort to hiking taxes, such as the value-added tax (VAT), and introduce other drastic measures to reduce expenditure and expand revenue for the government.
He may also have to confront the likely backlash from the populace, which has been strapped by years of failed government promises to alleviate the pangs of surging poverty, dwindling purchasing power, and surging inflation, leading to a decline in the standard of living for the average Nigerian and the effect of the depreciating value of the local currency.
Indeed, the months ahead are going to pose a lot of challenges and demonstrate how capable and prepared the president-elect is to confront the innumerable challenges facing the country.
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