A claim the other day by the Minister of Finance, Budgeting and National Planning, Mrs Zainab Ahmed at a webinar organised by the Nigerian Economic Summit Group, that “Nigeria cannot stop borrowing” has again raised questions about quality of planning in the nation’s capital. Many have found it worrying that at this time when many experts and other stakeholders within and outside the country have cautioned on the dangers of unbridled borrowing, the current administration appears to have shown gross insensitivity to this very disturbing issue. This newspaper has consistently deconstructed the penchant for borrowing for consumption and the danger it portends for the nation. The government is perhaps waiting for people to carry placards across the length and breadth of the country before it will re-evaluate its stance on further borrowing and thus stop this reckless fiscal indiscipline and arrogance in the management of the country’s public finance. For the records, the Federal Government currently spends more on debt servicing than on any other type of expenditure. In the recently approved 2020 reviewed budget, which was signed by Mr President on Friday, July 10, 2020, debt service for 2020 is almost N3 trillion, a figure higher than the amount budgeted for capital expenditure for the entire year.
More surprising is that instead of reducing the size of the 2020 budget with the advent of COVID-19, it even went ahead and increased the budget size from N10.5 trillion to N10.8 trillion despite the fall in the price of crude oil internationally. The country thus missed a golden opportunity to cut its coat according to its cloth by reducing the cost of governance. Instead, it still maintained the status quo in expenditure by cutting its coat according to its size. For example, political office holders still retained their bogus salaries and emoluments, the presidency still holds tight to its large fleet of Presidential jets and other perquisites of office and the system keeps running as if nothing is happening to the revenue earnings. What the government is doing is taking the easy and dangerous path of simply filling the financing gap by borrowing, borrowing and more borrowing. How can the minister convince any well-meaning Nigerian that the country cannot stop borrowing? The minister should tell it to the marines.
Currently, the very narrow revenue base of the county, which is about 6% of GDP leaves it with very little room to service its debt. The debt service payments currently consume over 50% of any revenue generated. More borrowing would thus constrain public financial management not only in the future, but also in the present. Any new government coming in by 2023 will find it extremely difficult to operate with the lacuna being placed in its way by the reckless current borrowings of the Buhari administration. It is sad that the National Assembly is also complicit in this mad rush for loans. For example, a whopping $28 billion was approved by the current Senate, under Senator Ahmad Lawan within a short period of 12 months since its inauguration in June 2019. Is it any wonder then that many have labelled this 9th Senate and the entire National Assembly as a “rubber stamp” National Assembly? With this barrage of borrowings, the total size of the country’s public debt would hover between N33 trillion to N40 trillion. This is quite huge for an economy with dwindling revenue inflows. The future of pensioners is also being threatened with the sum of N2 trillion borrowed from the Pension Funds to, supposedly finance roads and housing development.
Data emanating from the National Bureau of Statistics, the International Monetary Fund and the Fitch Solutions indicate that Nigeria’s debt to GDP ratio is approaching 40% of GDP with the figure projected to increase by 2021. Recession is also projected to set in very soon coupled with a further deterioration of the country’s fiscal situation. The looming recession is projected to imply a negative GDP growth rate of about 4.4% with the likelihood of a worse case situation of a 8% growth rate. The projections from experts indicate that the accompanying job losses could be in the region of about 21 million. So where is the country headed under this unsavoury circumstance? With these developments, Nigeria is currently projected to be one of the worst performing economies in sub Saharan Africa, with the likelihood of being one of those with worst economic recovery cases on the continent. All these definitely have negative effects on other macroeconomic indicators such as exchange rate and inflation among others.
As this newspaper noted recently, the reasons given by government for more borrowing, namely the negative impacts of COVID-19 on the economy as well as the drop in oil price flies in the face of cogent facts. The basic question is whether the resort to more borrowing is the only way out in addressing these challenges. The other defence that the Nigerian Economic Sustainability Plan of N2.3 trillion has to be financed does not appear to hold water. Having a N10.8 trillion budget and then a N2.3 trillion NESP could just be a waste of scarce resources. This NESP budget includes the controversial employment of 1000 youth for just two months in each of the 774 local government areas of the country. Is this really essential? Is it not money for the “boys”? Other reasons adduced for more borrowings are the need to finance the power sector reforms, the public health intervention funds and the support of the MSMEs as implied in the 2020 Finance Act. Have such programmes in the past been judiciously executed, even under this administration, without creating room for more corruption in their execution? What will this government not borrow from? Aside from the fact that the private sector is being crowded out of the domestic credit market, the unbridled borrowing has become a big embarrassment to this government and to the ordinary Nigerian at large.
On the whole, the minister of Finance would need to be reminded that the current fiscal positioning of the Buhari administration will lead the country on the path of certain economic perdition. The borrowing should stop. The plan to continue to engage the multilateral and donor agencies to procure more loans should be jettisoned. The country should just cut our coat according to its cloth. Most of these new borrowings find their way into the financing of consumption, instead of investment or production. It also creates an avenue for corruption. Many are inclined to ask which of the cost of governance cutting measures the government has implemented. What has happened to government’s hint at the implementation of the Oronsaye panel report? Government should focus now, primarily on cutting down on the cost of governance and block all loopholes for misappropriation of funds. The salary and perks of the political office holders should be reduced as a first step in recurrent expenditures and thus less need for borrowing. A stitch in time saves nine.