The Debt Management Office (DMO) last week announced in Abuja the nation’s Debt profile, putting the Federal Government’s domestic debt at the end of 2017 at N12.589 trillion; the 36 states and Federal Capital Territory, a domestic debt burden of N3.348 trillion. While the combined external debt of the Federal Government and the states are estimated to be N5.787 trillion.
Latest statistics on the national debt indicate that we owe some US$17 billion to foreign creditors and a staggering N16trillion to domestic creditors.
And less we forget, it is not yet known what became of the proposed request submitted by the Federal Government to the National Assembly last year on the plan to borrow the sum of US$29. 960 billion under the external borrowing plan for the years 2017-2020.
Nonetheless, Nigerians are keenly aware that our financing needs as a nation, especially in the infrastructure sector, are quite considerable. Truly, there is no denying that fact. However, what we demand is caution and greater due diligence in committing our country and future generations down that old, discredited path of huge debt burden.
Going down memory lane, it was barely twelve years ago, precisely in the year 2006, that our country threw off the shackles of debt by paying off our external debt obligations with the Paris Club of international creditors.
It was a painful experience and very costly in terms of our financial obligations, but it was necessary. Before then our external debts had amounted to US$36 billion, most of them accruals from interest obligations. It was difficult for the nation’s fiscal policy because we had to pay an average of US$5 billion annually in interest payments alone, not to talk of the principal. With that trend, it would have taken another half-century to pay off our total debts.
Contrary to what some had suggested then, settling that debt with the Paris Club at the time, was certainly the right thing to do. Before then, we were de facto slaves of the international financial agencies. After that settlement, our country had the breathing space to rebuild the foundations of our economy.
However, it was later leant that many of the Western powers bit their fingers in frustration that a big fish such as Nigeria was let off the hook of their control with such ease. But unfortunately, we seem to have learned nothing and forgotten nothing of that experience.
Now, the decision makers in government seem hell-bent on taking the plunge into heavy indebtedness, which only a few years ago, we had been taken out of.
We are not saying we cannot borrow from abroad. But to do so, we need to fulfill a number of critical conditions which, of course, must include that no single dollar from outside should be borrowed for social and human capital programmes such as education and health.
We can construct the buildings needed with local funds. We need to build our own medical technology and produce medicines locally instead of borrowing to import those inputs. During the nation’s tragic civil war in the years 1967-1970, the nation did not borrow a single dollar to finance the war effort.
During the post-war re-construction, Nigeria did not need to borrow money from anybody. The late sage, Chief Obafemi Awolowo of blessed memory, was Finance Minister at the time. He handled our public finances with such consummate skill and ability that we did not have to borrow either for the war or for re-construction.
Therefore, we insist that we should engage in external borrowing only for infrastructure projects. And even on that, not just all infrastructures. We should borrow externally only for infrastructures that can pay their ways in terms of economic and financial returns on investments.
Examples of these are power and electricity, railways, harbours and ports, mass transit systems, water supply and the rest of it. Thirdly, there is need for government to explain to us very clearly the terms of repayment and the conditional ties attached to the proposed loans.
Furthermore, in the face of all these foreign loans the federal government should guarantee that the rate of increase of debt servicing would reduce, going forward, as well as, targeted efforts to increase local production of some of the goods responsible for high foreign exchange demand see the light of day.
All put together, the authorities should assure Nigerians that the most important consideration for these borrowings are that the proceeds are being prudently applied to bridge infrastructure gaps occasioned by the decline in revenues.