The African Network for Environment and Economic Justice (ANEEJ) has called on the development partners the World Bank and International Monetary Fund (IMF) China, and African Development Bank AfDB to consider the cancellation of debt owed by Nigeria and other African countries.
Executive director, ANEEJ, Rev David Ugolor, started this yesterday in Abuja at the 2-day national conference on debt and development organise by the African Network for Environment and Economic Justice ANEEJ in conjunction with the the African Forum and Network on Debt and Development (AFRODAD) Bill & Melinda Gates Foundation, Open Society Initiative for West Africa on the theme: “Repositioning Nigeria For A Debt-Free Africa.”
Ugolor said that Nigeria’s ballooning debt burden remains one of the major challenges the new government is facing.
The Debt Management Office of Nigeria disclosed recently that Nigeria’s total public debt hit N87.38 trillion at the end of the second quarter of 2023. The figure represents 75. 29 per cent compared to N49.85 trillion recorded at the end of March this year.
“This is quite disturbing because most of Nigeria’s revenue is now being channelled to debt servicing obligations at the peril of basic social services in the country. This becomes even more worrisome when viewed against the backdrop that Nigeria remains the world poverty capital as designated by the World Poverty Clock report of 2023. It means debt will drive more Nigerians into extreme and multidimensional poverty if urgent and drastic steps are not taken by both the Nigerian Government and the International community,” he said.
With the significant debt burden, Nigeria lacks the fiscal capability to fulfil its commitments to achieve the Sustainable Development Goals (SDGs) and contribute to the attainment of the climate goals of the Paris Agreement. Instead of making accelerated progress, the country, like many other African countries, is regressing during what the United Nations has termed a “Decade of Action”.
Ugolor noted that the government must consistently develop different approaches in borrowing the funds to diversify the economy, to finance capital projects through blue economy, infrastructures development, tourism, railways, agriculture, technology innovation solid, energy transition to prioritise all sectors of the economy to compete with others developed nations like Germany Singapore, Japan United States of America British among others.
However, Nigeria’s deepening debt crisis did not occur in isolation. High fiscal deficits in many African countries have made it difficult to build resilience and tackle the multiple shocks (i.e., Covid-19 pandemic, natural disasters and insecurity occasioned by terrorism and banditry). As at last year, eight African countries were in debt distress and thirteen at high risk of debt distress.
Against this backdrop, African leaders, recently who gathered at the Africa Climate Summit in Nairobi from 04-06 September, called for debt relief across the continent to allow countries to get on with responding to the climate and other development crises. The costs of the crisis are unevenly distributed, with the heaviest burden bearing down on the population that is more exposed to economic, social and climate vulnerabilities.
Nigeria has the awful distinction of being the world capital of poverty, with 71 million people living in extreme poverty today (World Poverty Clock, 2023) and a total of 133 million people classed as multidimensionally poor according to National Bureau of Statistics data.
The World Bank gave reasons for the Nigeria situation: “Macroeconomic stability has weakened considerably due to multiple FX rates, high and increasing inflation, rising fiscal pressures, and declining forex reserves. Nigeria’s fiscal position has deteriorated since 2015 due to declining oil revenues and rising expenditures, resulting in persistently high fiscal deficits. To finance the growing deficit, the government has resorted increasingly to costly financing from the central bank, which in turn has increased interest costs, crowding out private sector credit, and contributing to inflation.”
“Inflation, especially for food items, has been on the rise since 2019, continually eroding the purchasing power of low-income earning Nigerians. Nigeria food insecurity has been aggravated by insecurity in farming communities in the country agrarian belts in the northern Nigeria zones due to activities of killer herdsmen, economic bandits and ideological terrorists. As a result, millions of inhabitants of this region have been displaced from both their ancestral homes and livelihoods and are living in Internally Displaced Persons (IDP) camps where they are living rather economically unproductive lives.
“Even in communities where some form of agriculture takes place, many of the farmers are forced to pay protection levies to criminal gangs in order to be allowed to till the land and harvest the yields. All these led to the huge cost of food items in the markets, pushing them beyond the reach of many Nigerians. The World Bank estimated that food inflation in 2022 alone pushed five million Nigerians into poverty.”
The report pointed out that the oil sector, which hitherto had been the major contributor to fiscal revenues and accounting for about 90 per cent of total exports, has underperformed since 2020 due to declining oil production and the mounting cost of the petrol subsidy which have prevented Nigeria from reaping the benefits of higher global oil prices.
This is in addition to security challenges in the oil-producing Niger Delta region as result of oil theft and ageing infrastructure and inadequate investments in the sector, all which have cut Nigeria’s earnings from the sector and deteriorated the country’s fiscal position. The result is that Nigeria is in a more fragile position than before the late 2021 global oil price boom.
“For us to achieve a new world order of our dreams, we therefore need to reposition the most populous black nation in Africa and of the world at large, our dear country Nigeria to provide leadership to the rest of Africa.
President Ahmed Bola Tinubu at the UNGA pointed that “Nigeria shouldn’t be pitied; Africa shouldn’t be pitied. There should be a level playing ground, there should be some kind of mutually respectful relationship between Nigeria and the rest of the world.”
There is urgent need of the global financial and debt architecture to reduced the cost time and legal implications for the debt restructuring for Africa country’s as well as Inclusive climate SDGs indicators in debt sustainability analysis
Recommendations on SDR utilisation is reallocation of SDRs to poor countries. There is an urgent need for SDR reallocation to poor countries in greater need. The allocation should not necessarily go through multilateral banks which would charge interest on the resources and further exacerbate the debt Crisis.
“The IMF should enrich the guidance notes by specific cases scenarios for better application and the guidance notes shouldn’t involved the conclusion of specific scenarios based on the various income categories and Economic structures of the country. The IMF should keenly monitor the utilisation of general SDR allocation in line with the fund’s overarching goal of achieving sustainable economic development of its member country.”
The government should exercise prudent fiscal management and priority must be given to aligning expenses in the country with available resources instead of allowing expenditures to dictate the amount of revenue that the country needs to raise. Reclassifying Nigeria within the World Bank which would allow Nigerian mutilated debt to be treated like that of any other low-income country.
In his part, the senior lecturer department of Public Administration Ambrose Alli University Dr Oscar Ubhenin, said, government tends to argue that the condition was not a debt problem, but a revenue challenge; the truth is that debt becomes a problem if the revenue base is not strong enough to service the debt sustainably.
“It invariably becomes a debt problem and possibly a debt crisis. The government’s actual revenue can hardly cover the recurrent budget, which implies that the entire capital budget and part of the recurrent expenditure are being funded from borrowing. This is surely not sustainable.”
Meanwhile, the Policy Analysis & Advocacy Officer On Africa Forum and network Debt Development, Mr Shem Joshua, said that debt activists from around Africa, Asia, Latin America and around the world converged on Bogota, the Colombian capital from 20-21 September to review the growing debt crisis in the global south.
The COVID-19 Climate and Economic crisis in 2021, the Board of the International Monetary Fund approved the release of $650bn Special drawing Rights (SDR) to help boost the liquidity of member countries. African countries received US$33.8 bn out of which Nigeria received $3.35bn as its share. There are concerns that the allocation of the 2021 SDR was insufficient to support post-covid economic recovery especially for low-income countries like Nigeria.
This is premixed on the backdrop that the current debt context is dominated by a rising trend in its burden on the economies of southern countries, with an ever-growing list of countries defaulting or facing high debt risks with no concrete possibilities of resolution, in a vicious circle that prioritises debt servicing over other urgent needs such as social protection, health, education, and climate.
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