PBM Fresh Loan Request: NASS should consider issue of sustainability of country’s debt- Dr. Muda Yusuf

Chris Uba

Economist and former Director-General of the Lagos Chamber of Commerce and Industry (LCCI) , Dr. Muda Yusuf  has expressed concern over the Nigeria’s debt ,saying that the current levels of debt are already at an unsustainable threshold.

Dr. Yusuf concern is against the background of President Muhammadu Buhari’s recent letter   requesting the Senate to approve sovereign loans of $4.054billion and €710million as well as grant components of $125million for proposed projects. If approved , this will bring  the  country’s total external loan stock to an all-time high of $45 billion.

The proposed addition to the debt stock indicates that external borrowings have skyrocketed the nation’s foreign debt portfolio by 366 per cent since 2015 when the total outstanding foreign debt was $9.7 billion.

The Debt Management Office (DMO) had  recently, released Nigeria’s Public Debt Stock as at March 31, 2021.

According to  DMO ,the total public debt stock which comprises of the Debt Stock of the Federal Government of Nigeria ,36 state governments and the Federal Capital Territory (FCT) stood at N33.107 trillion or USD87.239 billion.

The debt stock also includes Promissory Notes in the sum of N940.220 billion issued to settle the inherited arrears of the FGN to State Governments, Oil Marketing Companies, Exporters and Local Contractors. Compared to the Total Public Debt Stock of N32.916 trillion as at December 31, 2020, the increase in the Debt Stock was marginal at 0.58%.

“The growing stock of debt is a cause for concern.  Current levels of debt are already at an unsustainable threshold.

“ If over 80% of revenue is used to service debt,  then it is about time to slow down on debt accumulation,” said Yusuf.  

According to him, from reports,  this request is  new as it was not covered in the original borrowing. It is an addendum to the original plan which had already been approved.

 The former LCCI Dg said, “of course there is merit in borrowing for infrastructure development , but even at that,  the capacity to service the debt sustainably should be a critical consideration.

 According to him, “the risk is that at this rate,  part of the borrowing will inevitably be used to fund recurrent expenditure.  Already,  actual revenue can hardly cover recurrent budget.  The risk of ending up in a debt trap is quite high.”

He therefore advised  that the “National Assembly should have a deeper and non-partisan conversation on the issue of sustainability of the country’s debt .

 A human rights group, the Socio-Economic Rights and Accountability Project (SERAP) had on Saturday, asked Senate President Ahmad Lawan and Speaker Femi Gbajabiamila to reject President Muhammadu Buhari’s loan requests.The body asked that acceptance be held until the executive publishes details of how loans obtained since May 29, 2015, were spent.

According to the letter from the president, the sovereign loans will be sourced from the World Bank, French Development Agency (AFD), China-Exim Bank, International Fund for Agricultural Development (IFAD), Credit Suisse Group and Standard Chartered/China Export and Credit (SINOSURE).

The presidency had on Saturday in a statement issued by Senior Special Assistant to the President on Media and Publicity, Garba Shehu, defended its external borrowing plan by listing 15 projects, spread across the six geo-political zones of the country, to be financed with more than $4 billion from multilateral institutions, under the 2018-2021 medium term (rolling) external borrowing plan.

The presidency also said Buhari’s request to the Senate listed 15 proposed pipeline projects, the objectives, the implementation period, benefiting States, as well as the implementing Ministries, Departments and Agencies.

But SERAP in an open letter dated September 18, 2021, and signed by its Deputy Director, Kolawole Oluwadare, expressed “concerns about the growing debt crisis, the lack of transparency and accountability in the spending of loans that have been obtained, and the perceived unwillingness or inability of the National Assembly to vigorously exercise its constitutional duties to check the apparently indiscriminate borrowing by the government.”

SERAP said: “The National Assembly should not allow the government to accumulate unsustainable levels of debt, and use the country’s scarce resources for staggering and crippling debt service payments rather than for improved access of poor and vulnerable Nigerians to basic public services and human rights.”

Yusuf  had also ,during an interview with Channels TV, in May  said  Nigerians should be worried about the level of accumulated debt as it appears the nation lacks the capacity to service the debt.

He said, “We should be worried, particularly from the point of view of the capacity to service the debt.

“In 2020, for instance, debt servicing to revenue was close to 80%. In the current budget, the 2021 budget, the debt service provision was about N3.2 trillion. This is huge and clearly, the debt profile is clearly unsustainable.

“The debt to GDP argument is something that cannot stand in this type of economy because some major components of the GDP are not revenue-generating.

“Take, for instance, the agricultural sector. The agricultural sector accounts for about 23% of the GDP. What is the contribution of agriculture to revenue? I am not sure it is up to 2%. The distributive trade sector accounts for about 16% of GDP. What is the contribution of that sector to revenue? It is also very low.

“So, we have a major issue with productivity of many sectors, and that is why what we should be worrying about is how to ensure that the debt situation is sustainable, and we can only do that if we relate a lot more with the capacity to service the debt.

“Currently, our capacity to service debt is very weak. And this is time for a very difficult choice to be made if we want to get out of this situation.”

He further emphasised the need to cut the cost of governance, which keeps increasing despite the drop in revenue generation.

“We need to deal with issues of cost of governance because, in all of this, revenue is dropping, it’s shrinking but the costs are still going up.