Moratorium on new debts at all levels

The regime of the President, Major General Muhammadu Buhari (retd), is in its final days and has less than one year to its terminal date. In the states, all the governors who were sworn in on the same day as the president are also in their final days. With the virtual collapse of the economy under the watch of Buhari, it is imperative that the outgoing president and governors be guided to reduce the harm they can do to the economy before they leave office. The debt, indebtedness and borrowing scenario provides a good and fertile area for intervention, which is needed to save the economy from an irreversible collapse before they hand over power.

The basic assumption of this discourse is that Nigeria today, at the federal and state levels, has borrowed and accumulated debts beyond its capacity to repay in terms of the ratio of revenue to debt service. We have reached a point of unsustainability, deep down in a hole and the only reasonable course of action is to stop digging, literally interpreted to mean, stop borrowing, if we are to stand any chance of escaping the debt trap. Any further southern movement in terms of new borrowing will make it extremely difficult for us to begin the journey to fiscal sustainability.

It is pertinent to recall the publicly available information from the website of the Debt Management Office. As of June 30, 2015, one month after Buhari took over power, Nigeria’s total debt stock stood at N12.118 trillion made up of N10.428 trillion—being external debt of the Federal Government of Nigeria and states as well as the domestic debt of FGN; states domestic debts amounted to N1.690 trillion. Fast forward to the debt figure as of March 31, 2022, which is the last debt documentation presented by the DMO, Nigeria’s total debt has increased to N41.604 trillion made up of N16.617 trillion external debt and N24.986 trillion domestic debts. It is imperative to note that these figures are extremely on the conservative side and do not represent the street value of our debts, especially the external component of the debt. The Central Bank of Nigeria’s Official Exchange Rate of $1 to N415.75 as of March 31, 2022 was used in converting external debt to naira. The implication is that the external debt converted to naira at the conversion rate used by the Nigerian population is much more than the N16.617trillion reported above.

Furthermore, the overall debt as stated by the DMO does not include over $25 billion in ways and means incurred from the CBN, which is in excess of N19trillion at the CBN-determined exchange rate. Essentially, we have a national debt stock in excess of N60 trillion. The frightening aspect of the national debt is the geometric increase in debt on a month-by-month basis. As of December 2021, the national debt as stated by DMO was N39.556 trillion and the current figures meant that it added N2.048trillion in a space of three months, being an average of N682 billion per month. If the debt figures continue to grow at the current pace, it will add not less than N7.5 trillion before Buhari leaves office. But it will definitely add more than that because the Federal Government is totally broke and flat on its back. The increased borrowing to pay phantom petroleum subsidies mired in the most brazen and bizarre corruption; borrowing for recurrent and capital expenditure means the debt level will increase so dramatically before he leaves office.

Nigeria is so heavily indebted and finds it difficult to service debts because the Federal Government and the states borrowed against the gravamen of the rule of law and its due process. Considering that items 7 (borrowing of moneys within or outside Nigeria for the purposes of the Federation or of any State) and 50 (public debt of the Federation) of the Exclusive Legislative List of the 1999 Constitution as amended govern borrowing and its management, the Fiscal Responsibility Act is the relevant law for borrowing and debt management across the tiers of government. The Act clearly states that borrowing shall be for long-term capital expenditure and human development. The jurisprudential, economic and common sense postulate behind restricting borrowing to capital expenditure and human development is that debts are to be incurred for regenerating projects and investments, which will increase national productive capacity and service delivery, thereby increasing value addition and the stock of goods and services produced in Nigeria. This will ultimately lead to increase at the federal, state and local government levels in available public revenue and improvements in the stock of human capacity to work on the economy. Therefore, the debts were expected to facilitate the generation of revenue for debt service and repayment.

Borrowing to pay salaries and other recurrent expenditures cannot be justified under the unambiguous provisions of the Fiscal Responsibility Act. Also, borrowing to pay fuel subsidies cannot by any stretch of the imagination be justified under the Act. Borrowing and using the proceeds to award poorly thought out and designed but inflated contracts was not on the mind of the legislature when they were enacting the Act. Borrowing for overheads and to maintain the lavish lifestyle of a parasitic political class was never in contemplation. But all the foregoing is exactly what the Buhari-led regime is encouraging today.

At the state level, we have a situation where governors whose states already have huge debts are going for more borrowing and doing so in a way and manner that suggests insensitivity to the younger generation and the plight of the majority. Delta State is reported by the DMO as of March 31, 2022 to have a debt profile of N163.478 billion. But the governor has received approval from the State House of Assembly to borrow N150 billion with a few months to the end of an eight-year tenure. The Kano State House of Assembly recently approved a loan of N10 billion which the governor stated is to fund a closed-circuit television project in the Kano metropolis. Already, Kano State has a debt profile of N127.847 billion. A state like Imo is indebted to the tune of N204.612 billion with nothing in terms of infrastructure to show for it. The embarrassing poser is: where will the resources to repay these debts come from since they were not invested in the sources as permitted by the enabling law.

In the circumstances, it has become imperative to propose a moratorium on new borrowing across all tiers of government. We are already in a deep hole and we cannot afford to be digging deeper when we have the intention of being rescued from the pit. We have reached a point of collapse in our debt management and if the Federal Government and many state governments were private sector entities, their creditors would have long applied for them to be wound up.

However, to ensure that the collapse is not irreversible, we need to stop our brothers and sisters in the corridors of power from continuing the economic banditry masquerading as fiscal governance. Nigerians need to rise with one voice calling the executive and legislature at all levels to order. Enough of new debts in violation of the FRA