President Muhammadu Buhari has asked the parliament for approval to borrow $4 billion and €710 million to fund the deficit in the 2021 budget. That has been expected when the government could not make progress to extract “abandoned balances in bank accounts” and “unclaimed dividends”. With no productivity to bring tax Naira, going to the capital market was expected.
I understand that PDP, the opposition party, is not happy with the development. Sure, PDP left the national debts at about N12 trillion when it left power in 2015. In six years, that figure has hit N33.1 trillion as of March 2021.
Yet, this is not the end: I expect this loan to hit N100 trillion by 2027. Even the Debt Management Office, a government bureaucracy, is worried. Nothing will change this trajectory until there is a sense of ownership and responsibility in Nigeria. Our current structure makes this possible: with no intra-state competition, everyone sleeps because Abuja will feed us.
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What do I mean? Adamawa’s FDI for a whole year was $20,000, and that effort added it to the list of Nigerian states with FDI in 2020: “By destination, Lagos emerged as the top destination of capital investment in Nigeria with $8.3 billion, followed by Abuja, which received $1.3 billion. The others on the list are Abia State with relatively lower $56 million, Niger with $16.4 million, and Ogun with $13.4 million. Anambra State recorded $10.2 million, Kaduna State recorded $4.03 million, Sokoto got $2.5 million and Kano got $2.4 million. Akwa Ibom received $1.05 million ahead of Adamawa, which received just $20,000.” Yes, Simply, no incentive to leverage on comparative advantages across the nation. Twenty-six Nigerian states recorded zero foreign investment in the whole of 2020, figures released by the National Bureau of Statistics show.
My biggest concern is that the Nigerian government has not opened our borrowing business so that fintechs can participate! Yes, that is a huge market which is growing in double digits. I expect it to continue to grow irrespective of the party that takes power in 2023 until fundamental changes take place in the economy – and that is intra-state competition or what some call fiscal federalism!
This app – Jeka (!) – can raise $1billion via API to all bank accounts for x% monthly interest for Abuja! No need for JP Morgan Chase, Goldman Sachs, etc. Go Figure.
People, more loans!
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Comment: Well articulated, however focus on debt should be in 2 parts… Debt to GDP ratio and what the burrowed funds is used for. Today America is burrowing $2trillion to finance deficit caused by Corona and jump start the economy. Last I check Nigeria’s debt to GDP was about 35% while IMF stipulates 25% as a comfort band. America’s debt to GDP is 107%, China 246% while India 21%, Ghana is 78%, UK 106%.
My Response: If a villager borrows from his village, it is market. But if he goes to another village, it opens up for enslavement. Nigeria’s borrowing cannot be compared with what happens in US because US borrows from its village (America) while Nigeria goes to another village – and this the slavery.
In Igbo novels, from Uwadiegwu to Omenuko, kinship-sourced debt is seen as a better alternative than a “foreign” one because if you lose your home, your kinsman (the lender) is obliged to host your wife and children because the child is Nwaoha (a child belongs to the village, not just to the parents) including to the lender.
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Is the exchange rate for the loans fixed? Because if it’s changing with the colour of the naira, then it complicates the already bad situation further. The supposed low interest rate for foreign loan is deceitful, the real demon remains the exchange rate.
Another SAP is loading, because this was how Nigeria got there before, Babangida didn’t just wake up and destroyed the naira, things happened, and the our headmasters suggested SAP, we know the rest.
When there was money, we were living lavishly; looting for fun, squandering reserves for the unborn, and now we have run out of money, we still don’t know how to quench our bad behaviours. This is the most irresponsible generation of Nigerians, that is our label.
If you call for elections today, so many decrepit creatures will show up as politicians, sharing billions to get elected. Why are they sharing all of that money to get into a system that is broke and orphaned? Because none is going there to reverse the fall, else we will be begging people to take up political offices. You don’t spend money to go into debt-ridden system, but because we are too criminally minded, all play is fair play.
We are using borrowing to make governance look easier, but it’s not, rather what we are simply doing is making things a lot more difficult for toddlers of today, and that’s very cruel. We neither have honour nor good conscience, our selfishness is destroying generations.
Our debt servicing is about to exceed 100% of our revenues, what it means is that all the salaries government workers earn will be borrowed, that of capital project is already 100% borrowed.
We have to rethink political governance, it needs to look like church work, where you beg people to accept offices, because you are not getting paid but will get drained. This scam we call government will destroy us all, until we change the playbook.