25th March, 2018
Mr Eze Onyekpere, Lead Director, Centre for Social Justice (CSJ), a Civil Society Organisation (CSO) says the continuous accumulation of debt was not the best way to run a sustainable fiscal regime.
He said this on Sunday in Abuja.
The Debt Management Office (DMO), in its latest publication of Nigeria’s Public Debt figures as at Dec. 31, 2017, showed that external debt was 26.64 percent of the portfolio, up from 20.04 percent in 2016, while domestic debt was 73.36 percent, down from 79.96 percent in 2016.
The figures released showed that domestic debt for the Federal Government was N12.589 trillion, while the domestic debt of states and the FCT was N3.348 trillion.
The external debt of the Federal Government, States and the FCT was N5.787 trillion.
The total public debt was, therefore, put at N21.725 trillion, indicating an overall increase of N4.34 trillion from N17.36 trillion at the end of 2016.
The debt represents 18.20 percent of Nigeria’s Gross Domestic Product (GDP) for 2017.
According to DMO, this shows that Nigeria’s debt continues to be sustainable and is well within the threshold of 56 percent for countries in Nigeria’s peer group.
Onyekpere, however, said that this was a frightening situation for the country.
“The frightening aspect of this debt pile up is the rebalancing of the debt portfolio to include more foreign debts in an economy that is finding it hard to produce enough foreign exchange to defray its import bills.
“The scarce foreign exchange has resulted in a massive devaluation of the national currency since 2015 and our experts in government think this is the best way to go.’’
He, however, raised some pertinent concerns regarding the repayment of the loans when they became due.
“How shall we raise the foreign exchange for repayment of the new debts when they become due? In what sectors of the economy are we investing the proceeds of this borrowing?
“Is the investment in sectors that can produce foreign exchange or sufficient as growth poles to incentivise the economy into export-led growth?
“The answers to these questions should come from the economic managers of the present administration,’’ he said.
Onyekpere said that the implication of the present debt on future budgets was the continuous need to set aside more resources for debt repayment.
“This would further depress state-led economic growth activities in the immediate and medium future of Nigeria.
“The opportunity costs would be in terms of resources which would have been dedicated to human capital development would now be used to repay debts that were incurred without due process.’’
He said going forward, the Federal Government should ensure that it abides by Section 42 of the Fiscal Responsibility Act (FRA), which provides that the President shall within 90 days from the commencement of the Act and with advice from Minister of Finance, subject to approval of the National Assembly, set overall limits for the amounts of consolidated debt of the Federal, State and Local Governments.
Onyekpere said that some analysts may interrogate the benefits of empowering the Federal Government to set the limits of consolidated debt for the states and local governments.
He, however, said it was necessary because the economy was one, and what happens in one state affects others.
“There is, therefore, the need for effective national planning which sets the tone for a healthy economy for all.
“Fiscal federalism does not imply lack of order and is not about a chaotic environment where every tier of government works at cross purposes,’’ Onyekpere said.