27th December, 2019
Former President Olusegun Obasanjo said Nigeria faces an impending bankruptcy, with the country’s external debt ballooning by 700 per cent in four years. But simple fact checking showed the former leader got his figures wrong on the level of external debt.
He sounded the bankruptcy alarm as a keynote speaker at the ‘Why I am Alive’ campaign celebration in Lagos. The event tagged “The Nigerian Story” was created by the chief executive of Eureka Productions, Caroline Moore.
According to a report by The Guardian, Obasanjo put Nigeria’s external debt at N24.947 trillion ($81.2 billion), from $10.32 billion in just four years (2015).
In his interpretation, Nigeria would need to commit half its foreign foreign earnings to servicing its current level of indebtedness.
“Such a situation talks about impending bankruptcy,” the former president warned. He insisted that “no entity can survive while devoting 50 percent of its revenue to debt servicing.”
He explained that the current budget out of which Nigeria spends 25 percent to service debt “is not the country’s total earning; a lot of it is also borrowing. Simply put, we are borrowing to service what we have borrowed and yet we are borrowing more.
“I do not need the brain of any genius to conclude that those who use statistics to dig us deeper into debt are our enemies: statistics can be used to serve any purpose, and that is why Winston Churchill talked of lies, damn lies and statistics, meaning statistics can be made master of lies.”
As The Guardian reported, Obasanjo called for national dialogue or debate on Nigeria’s short, medium and long-term plans as a nation.
He said his biggest worry was that, with the scale of debts the country was walking into, “there are already fiscal challenges to meet(ing) our obligations.”
Fact checking however showed that Obasanjo may have been misquoted on the level of external debt and he also was quoting outdated debt figures. .
According to the Debt Management Office, Nigeria’s external debt as at June 2019 was $27.1 billion, with the 36 states and Abuja owing $4.2 billion. Domestic debt level as at June was $56.7 billion, with the states owing $12.9billion . In Naira terms, external debt stood as N8.3 trillion in June and domestic debt was N17.3 trillion.
Thus, the former President got it wrong putting the entire external debt at $81.2 billion.
Obasanjo’s critique of Nigeria’s debt profile appeared to be a rehash of a similar one made recently by a former Deputy Governor of the Central Bank of Nigeria (CBN), Dr. Obadiah Mailafiya, on a Channels TV Programme.
Obadiah stated that the Buhari Government inherited a debt stock of less than USD7 billion 2015, which according to him, has now increased to USD84 billion.
The Debt Management Office on 9 December issued a rebuttal and clarification on Nigeria’s debt situation, saying Obadiah’s statement was totally incorrect and not supported by public debt data that is readily available on its Website.
DMO’s rejoinder is instructive: “Contrary to the claim by Dr. Obadiah Mailafiya, the Total Public Debt Stock as at June 30, 2015, (shortly after the current Administration came into office), was USD63.81 billion, and not USD7.0 billion as claimed by Dr. Obadiah. Similarly, the nominal increase in the public debt stock between June 30, 2015 (USD63.81 billion) and June 30, 2019 (USD83.88 billion), was about USD20.0 billion, which is a far cry from the gross misrepresentation made at the Live Programme on Channels that the public debt stock increased by USD77.0 billion during this period.
“The DMO considers it expedient at this time in the interest of the general public to make the following clarifications regarding Nigeria’s Public Debt:
“The Public Debt Stock data published by the DMO comprises debt of the Federal Government of Nigeria (FGN), the 36 States of the Federation and the Federal Capital Territory (FCT). It is therefore, erroneous to attribute the growth in the Public Debt Stock to borrowings by the FGN only.
“While the Public Debt Stock has increased, the increase is well guided by the objectives of the Economic Recovery and Growth Plan (ERGP) and the Medium-Term Debt Management Strategy, 2016 – 2019. New Borrowing was included as one of the strategies in the ERGP to be deployed in the near term, to stimulate economic growth and job creation. With the deployment of more funds into capital projects, the borrowings contributed to job creation and the recovery from economic recession in June 2017. The introduction of project-tied financing products (Sukuk and Green Bonds) in the second half of 2017 as part of the New Borrowing also supported infrastructural development.
“By international benchmarks, Nigeria’s Total Public Debt relative to the Gross Domestic Product (GDP) is sustainable at 18.99 percent of GDP as at June 30, 2019. However, the Government recognises that the ratio of its Debt Service to Revenue is rather high, a situation that is directly attributable to Nigeria’s low Revenues. This is clearly evident from the Tax to GDP ratio of 6% in 2018. It is for this reason, that the FGN has developed and is implementing a number of strategies to enhance the Government’s Revenues significantly. The Strategic Revenue Growth Initiative introduced in January 2019 and more recently, the Finance Bill are some of the measures introduced by the Government. It is expected that these efforts would substantially enhance Government’s revenue and thus, bring down the ratio of Debt Service to Revenue.
“It is also expedient to highlight the need for the Government’s recent request for approval of the USD22.718 billion Medium-Term External Borrowing Plan, 2016 – 2018 (outstanding from the USD29.96 billion previously submitted) by the National Assembly. The proposed loans which are meant to finance critical infrastructure, will be mostly sourced from the Multilateral and Bilateral window, and are project-tied. The Loans come with cheaper financing terms namely: low interest rates, longer tenors and ample grace periods. This proposed loans which are concessional and semi-concessional are more cost efficient and would facilitate infrastructural development which in turn would create new jobs; improve the quality of life and make Nigeria more competitive for business. It is instructive to note that the proposed External Borrowing Plan, also includes the external funding needs of the States and FCT”.