By Moshood Oshunfunrewa
President Bola Ahmed Tinubu’s persistent borrowing for non-productive recurrent expenditures and social activities raises serious concerns about the sustainability of Nigeria’s growing domestic and international debts. To underscore this issue, we must first examine the stark statistical facts that illuminate the precarious nature of the nation’s fiscal situation.
Nigeria’s debt profile has been on the rise over the past decade. The nation’s debt stood at $22.7 billion in 2009 but has skyrocketed to over $87 billion by the end of 2020, according to data from the Debt Management Office (DMO). While debt can be a useful tool for financing development projects and addressing short-term fiscal deficits, the exponential increase in Nigeria’s debt has raised alarm bells both domestically and internationally. This alarming escalation has signal continual check on an unfavorable debt-to-GDP ratio, indicating an imbalance between borrowing and actual economic productivity. A high debt-to-GDP ratio poses a substantial threat to economic growth and diverts vital resources away from crucial public services such as healthcare, education, and infrastructure.
Moreover, Nigeria’s excessive dependence on oil revenue for its budget exposes the nation to the volatile fluctuations of global oil prices. When oil prices plummet, as they frequently do, the government faces challenges in generating sufficient revenue to service its debt obligations, forcing it into a relentless cycle of further borrowing.
Perhaps the most alarming aspect of this debt accumulation is the fact that a significant portion of these borrowed funds goes toward financing recurrent expenditures, including N6.9billion vechicles for office of the First Lady in the approved of a N2.1 trillion supplementary appropriation bill in 2023 and presidential Yatch amidst of mass abject poverty and hunger, rather than being invested in infrastructure development or other productive ventures. This misallocation exacerbates Nigeria’s economic challenges and raises questions about the prudent management of public funds.
The implications of Nigeria’s mounting debt burden on economic indices are deeply concerning. Inflationary pressures can destabilize the economy, as the government continually resorts to borrowing and monetizing deficits. Exchange rate vulnerabilities emerge, given that a considerable portion of the debt is denominated in foreign currencies, leaving the nation susceptible to currency fluctuations.
Credit rating downgrades are another consequence of excessive debt, making Nigeria less appealing to foreign investors and reducing its access to affordable credit in the international financial markets. Additionally, the private sector’s ability to access credit becomes increasingly constrained, hindering business growth and job creation.
Given these critical issues, it is imperative to reevaluate Nigeria’s economic strategy. The current emphasis on privatization and commercialization of national assets may not provide the most effective solution. Instead, the nation must adopt a more comprehensive approach by diversifying the economy through investments in non-oil sectors such as agriculture, manufacturing, and technology.
Improved revenue collection mechanisms, a reduction in financial leakages, and the broadening of the tax base are crucial to diminish reliance on volatile oil revenue. Responsible debt management is essential, ensuring that borrowed funds are directed towards projects that can stimulate economic growth and generate revenue to repay the debt.
Furthermore, enforcing fiscal discipline is essential to control government spending and ensure that borrowed funds are utilized judiciously. By pursuing this alternative path, Nigeria can work toward securing a prosperous and stable future, returning the nation to a path of economic productivity and stability for the betterment of all its citizens.
Moshood Oshunfurewa,
Social critic from Lagos
08035936663
