Editor’s Note: This post continues from this one:
It’s noteworthy that such an economic approach as borrowing becomes consequential only in certain circumstances, and not in all as being presumed in various quarters.
Even as an individual, if you dare take borrowing as a tradition or norm, you will surely live to regret it. We, either as individuals or groups, need to borrow sometimes but not always.
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Of course, many are of the view that provided you are borrowing for a tangible project, it’s a welcome development. No doubt, borrowing becomes paramount and necessary only when the prospective borrower intends to use it for feasible projects such as capital expenditure.
Ab initio, Nigeria was borrowing for tangible reasons. But as a result of corruption, rather than doing the needful or investing the borrowed funds meaningfully, she invariably ends up doing otherwise.
So, if Nigeria as a people failed to address such a lapse, the nauseous phenomenon would continue to repeat itself, thereby making the country indulge in borrowing perpetually.
On a yearly basis, Nigeria’s international debt increases colossally, thus negatively affecting her current account balance which is expected to rise steadily.
Survey indicates that external debt in Nigeria averaged USD6.38 billion from 2008 till 2015 when it reached an all-time high of USD56.74 billion in the fourth or last quarter of the said fiscal year which was about 10.9% of her GDP for that very year, though it recorded a low of about USD3.63 billion in the first quarter of 2009.
Nigeria’s total public debt stock stood at N33.107 trillion or USD87.239 billion, as at first quarter or March 31, 2021. Worse still, a large portion of these debts are owed to private lenders at variable interest rates.
Rather than being preoccupied with how to repay the backlog of debts, the government keeps borrowing at the expense of the country’s economy. This implies that Nigeria has apparently absorbed incessant borrowing as a tradition.
Having acknowledged that it isn’t a wholesome belief or practice, there’s a compelling need to put up stiff measures towards addressing the monumental anomaly.
Against this backdrop, let’s briefly take a tour to the history book. The IMF then imposed its Structural Adjustment Programme (SAP) conditionality on the deficit countries, which Nigeria was inclusive, to force them to take necessary steps toward reducing their payments deficits and consequently earn sufficient foreign exchange to enable them to pay back their loans.
Hence, they had to devalue their official exchange rates, abolish or liberalize foreign exchange controls, introduce anti-inflationary programmes as well as adopt a free trade policy.
Notwithstanding, the ‘almighty’ SAP didn’t produce any successful result; rather, it ended up constituting more problems, perhaps still due to corruption. Now, the question is: how can Nigeria escape from this lingering debt trap as well as desist from her unending borrowing tradition?
The answer is simple. We need to embark on an economic lobotomy. The Mohammadu Buhari-led administration has to shift course from an internationally-dependent growth to domestically-based economic development plan.
To this end, it has to strengthen most of the country’s fiscal policies, participate in frugal expenditure, initiate deflationary economic measures, detest construction of white-elephant projects, and most importantly tackle the unbridled corruption as well as security challenges with the last drop of its blood.
We must understand that growth can be self-generated by focusing on products commonly consumed by low-income citizens. Even a little improvement in the productivity and income in such a quarter will capture a sizable market and assist in sustaining development of other products and markets.
Therefore, instead of embarking on massive infrastructural projects, the government ought to start with improving such capital-oriented projects that make production cost-effective as road cum railway network, power cum water supply, and refineries.
So, acknowledging that borrowing is only regarded as a healthy practice when the borrowed funds are utilized judiciously and selflessly, it’s needless to reiterate that governments at all levels must invest meaningfully and wisely to reap heavily and successfully.