Amusingly, we still dwell in the euphoria that Nigeria is evaluated to be the top oil and gas producers in Africa and has the continent’s largest natural gas reserves. Nigeria is one of the world’s biggest oil exporters, pumping out around 2.3 million barrels each day. Often referred to as the “Giant of Africa”, owing to its large population and economy. With slightly over 206 million inhabitants, Nigeria is the most populous country in Africa and the seventh most populous country in the world.
Shockingly, in a 2018 report, three years into the APC President Muhammadu Buhari led government, Nigeria overtakes India as world’s poverty capital. The report clearly states that Nigeria has already overtaken India as the country with the largest number of extremely poor people.
Nigeria saw the emergence of the oil industry as the main driver of growth. Since then, the economy has mainly gyrated with the flourishing cycles of the oil industry. Government expenditure outlays that are dependent on oil revenues have more or less dictated the pace of growth of the economy. Realistically, it is clear that the economy has not actually performed to its full potential, particularly in the face of its gross infrastructural deficit, rising population and unprecedented security challenges.
In 1999 when Nigeria returned to democracy, our economic growth rose considerably, but the growth has not been effectively efficient for national transformation. This implies that economic growth in Nigeria has not resulted in the anticipated structural changes that will birth the Nigeria we love to see. The Nigeria that makes manufacturing the engine of growth, create employment, promote technological development and induce poverty alleviation.
The Nigerian economy has grossly underperformed relative to her enormous resources. The major factors accounting for the relative decline of the country’s economic fortunes are easily identifiable as political instability, lack of focused and visionary leadership, economic mismanagement and corruption.
Buhari’s Government and the Burden of Debts
President Buhari and his team have continued to accrue more debt for Nigeria. This can be seen from their fiscal and monetary policies since 2015. The major factors responsible for this include the rapid growth of public expenditure, particularly on capital projects, borrowing from the international community at non-concessional interest rates, decline in oil earnings due to international market influences and the dependence on imports, which contributed to the emergence of trade debts.
Before May 2015 when President Muhammadu Buhari led administration came on board, Nigeria had a total debt of about N12 trillion, less than two months into the APC led government in June 2015, the country’s debt rose to N12.1 trillion.
Unfortunately, as the first term was running out, by the end of June 2018, Nigeria’s debt has almost doubled. The astronomical growth in Nigeria’s debt profile due to heavy borrowing put the figure to a record high of N22.4 trillion. According to the data provided by the Debt Management Office, Nigeria’s Debt Profile as of September 2019 stood at N26.215 Trillion.
President Muhammadu Buhari’s recent request for new borrowings in the Appropriation Acts has gotten many Nigerians asking questions on the need for it when the country is said to be using 50 percent of its revenue to service debts.
A presentation by the DMO at an Interactive Sessions showed that the Total Public Debt, comprising the Debts of the Federal and State Governments as of September 2019 stood at N26.215 Trillion. The comparative figure for June 2019 was N25.701 Trillion which implies that in the quarter of July to September 2019, the Total Public Debt grew by 2.0%. But the Federal Government, through the Debt Management Office explained that the borrowings by Buhari’s led administration are driven by strategy.
The Only Reason Buhari Is Allowed To Borrow
In his first four years, Buhari also failed to address the Challenges Nigerians are facing. Under his watch, Nigeria overtook India as the country with the largest number of people living in extreme poverty. About 87 million Nigerians, or half the population, live on less than US$1.90 per day.
And economic growth has been sluggish since his election in 2015. The country went into recession in 2016, with a negative 1.6% growth rate. There was a rebound in the economic growth of about 2% in 2018. Nevertheless, the IMF forecasts that growth will remain feeble at an annual average of about 1.9% – 2.73% from 2019 – 2023.
By re-electing Buhari despite his unimpressive economic performance in his first four years, Nigerians are giving him a second chance. One of Buhari’s campaign catchphrases was “Next Level,” signalling his determination to build on weak programmes initiated in the first term. These include conditional cash transfers to vulnerable citizens, school feeding programmes, giving young people critical skills, and implementing a microcredit scheme for small traders and artisans.
But these initiatives, however noble, are not widespread and substantive enough to touch a majority of the Nigerian population. If he must take a loan, Buhari should be planning a massive stimulus package to jump-start the economy. This is particularly important given the fact that economic growth is going to remain so lacklustre anyways.
Uproar as Senate Approves Buhari’s $22.7 Billion Request
There was an uproar at the floor of the Senate on Thursday following the approval of President Muhammadu Buhari’s request to borrow $22.7 billion to fund critical infrastructure projects under the 2016 – 2018 External Borrowing Plan.
Buhari, in 2019 had sent the loan request to the senate but was rejected by the Upper Legislative Chamber under the leadership of Bukola Saraki.
Before its approval, Senate Minority Leader, Enyinnaya Abaribe cautioned against the approval of the loan.…
“We are going to pass a loan of $22.7billion for which we are being denied the privilege to express our reservations. You are putting us in a very impossible position.
“There is some aspect of this loan that we object to. I want to ask on behalf of our colleagues here that we take these items one by one and vote on them.” Abaribe said.
While responding, Senate President, Ahmad Lawan disagreed with Abaribe saying the Senate will only vote on the two recommendations in the report. The heated debate over the request forced the Senate to enter into an executive session. After the close door session that lasted for about 30 minutes, the Senate finally approved the two recommendations in the report.
Is Nigeria financially stable, Affirming the Obvious?
Due to the world economic crisis, Oil price volatility continues to influence Nigeria’s growth performance. Between 2000 and 2014, Nigeria’s gross domestic product (GDP) grew at an average rate of 7% per year. However, since 2015, economic growth remains muted. Growth averaged 1.9% in 2018 and remained stable at 2.52% to date.
Yesterday, President Muhammadu Buhari has told Nigerians that the challenge facing the country is higher than the national income.The President described this as a major challenge that we have to overcome as a nation if the country is to move forward. Buhari explained that although his administration has been challenged on all fronts from security, absence of critical infrastructure, poverty and unemployment.
Buhari said…“As we all know, among many challenges governments all over the world face, funding is the major one because it is the life wire of governance. Without it, the government cannot deliver.
“After funding, comes strategies and human resource needed to succeed. The strategies and human resource needed for our government to succeed are all there. Funding is always the challenge and corruption. This explains the governance strategy of our government that combines anticorruption and critical interventions delivery”
“As a government, we are interested in solutions that will help propel Nigeria to the next level we envisaged. As you deliberate on these issues and many more, therefore, it is hoped you would proffer solutions that would enable the government to overcome these challenges.
“Although, as a government, we have been striving to prioritize and balance between the welfare of Nigerians and infrastructural needs of the country. This we have been doing through pragmatism that enables our government to simultaneously concentrate on social investment and infrastructure provisioning.
Nigeria currently has a very fragile economy and as such, every economic and tax policy must be well thought out, with a solid strategy put in place for its implementation. Indeed, the government needs to fund the increase in the minimum wage and with our low tax rates, taxation seems a viable option. That said, we must avoid a scenario where the burden impacts the economy negatively overall. The VAT rate increase will be of little use if the workers earning the increased minimum wage end up in a no better position than before both policies were introduced.
Why the 8th Senate Rejected Buhari’s Request
The 8th Senate, under the leadership of Senator Bukola Saraki had in 2016 rejected Buhari’s request to borrow the sum of $29.960bn.
Explaining the reason for the rejection, Former Kaduna Central Senator, Shehu Sani disclosed that the request was turned down to save Nigeria from sinking into the “dark gully of the perpetual debt trap.”
He said, “If we had approved that loan request, our external debt could have catapulted to over $52bn and that is not sustainable.
“With the current escalation of borrowing, we will be walking into debt slavery and move from landlords to tenants in our own country.
“They will always tell you that even America is borrowing and I don’t know how rational it is to keep on borrowing because another country is borrowing.
“If we keep listening to bankers and contractors, we will keep borrowing and burying ourselves and leave behind for our children a legacy of the debt burden.
“Loans are not charities. Most of those encouraging more borrowing are parasitic consultants, commission agents, rent-seeking fronts and contractors.” He said.
In conclusion, Nigeria’s development process has always been afflicted by the claim that once borrowed capital is invested, growth follows automatically, which needs to change. The truth, however, is that no amount of money builds a nation. Capital investment only creates Depreciating Assets (DAs) which eventually leads to growth without development.
Nigeria’s frequent borrowing and rapid accumulation of debt are signs of mismanagement of national resources, movements without motion in the anti-graft war by those in government and high-level corruption associated with erecting infrastructure.
