Nigeria’s debt profile has been steadily rising over the past decade, and the latest request for fresh loans of $8.7 billion and €100 million by President Bola Ahmed Tinubu is, deservedly, generating genuine concerns.
If approved by the creditor agencies, the loan will add over N7 trillion to the current debt stock of N87.38 trillion as of June 2023.
For the avoidance of doubt, seeking loans for critical infrastructure and development projects is not inherently bad in itself. The worry by Nigerians is that there seems to be very little to show for this quantum of indebtedness
We note with pains that successive governments have not been able to justify these loans which are perceived to be spent on consumption such as stupendous salaries and allowances for elected officials, rather than strategically investing in projects that can repay the loans or catalyse economic growth.
Worse, in our opinion, is the brazen lack of transparency and accountability in loan utilisation which further erodes public trust and casts doubt on the need for the facilities in the first place.
Recently, President Tinubu presented a N27.5 trillion budget for 2024 to the National Assembly. Of the N27.5 trillion, the non-debt recurrent expenditure is pegged at N9.92 trillion and debt service is projected at N8.25 trillion while capital expenditure gets N8.7 trillion.
With debt servicing now devouring nearly half of the proposed 2024 budget, Nigeria teeters precariously on the brink of a tragic debt trap which we insist deserves urgent and radical reforms.
Obviously, in our view, Nigeria clearly has a major revenue challenge. But the answer, we dare to posit, does not lie in endless taxation that further burdens ordinary citizens already struggling with double-digit inflation and food insecurity.
Experts in the financial sector have unrelentingly called for new thinking as regards the nation’s tax policy. They argue and we agree that there is a need for fresh ideas to radically expand the tax net – currently less than 40 million out of 200 million Nigerians pay any taxes at all. Another disturbing dimension to the tax system is corruption as a huge chunk of what is collected as tax is diverted if not out rightly stolen.
This, in our opinion, requires a digitization of tax filing and collection processes so as to reduce corruption and leakage. Also, fast-tracking initiatives like the national ID card and BVN can significantly expand the tax net.
Furthermore, the hemorrhaging of revenues due to corruption and leaks across agencies must be stemmed decisively.
According to PwC, corruption could cost Nigeria up to 37 per cent of GDP by 2030 if not addressed urgently.
Also, YIAGA Africa in 2021 disclosed that Nigeria has lost at least $582 billion since independence due to endemic corruption. In the oil sector, which is the mainstay of the economy, crude oil theft is the order of the day.
The recent revelation that N4.3 trillion worth of crude oil was stolen in just five years spotlights the industrial-scale of oil theft and it’s threat to Nigeria’s economy.
In the considered opinion of this newspaper, all revenue-generating agencies must not only be fully digitised but also strictly monitored, with supervisory mandates clarified to plug gaps. Culprits should face severe punishment as deterrence, no matter how powerful.
Also, the new ministries established by President Tinubu to catalyse the economy – the blue economy, gas and creative sectors – must move from rhetoric to real action.
The perennial lip service paid to economic diversification must shift to commensurate dynamics geared, strategically, towards growth and development
We strongly suggest that states can specialise in industries where they have comparative advantage to boost exports and growth. And diversification should look beyond the extractives sector to job-elastic sectors like agriculture and manufacturing.
Needless to say, the astronomical cost of governance must be trimmed aggressively. Salaries and overheads of elected officials at federal, state and local government levels consume much of public resources that can be redirected to infrastructure and human capital development.
Financial waste through duplications, ghost workers, opaque allowances and general inefficiency is unethical when millions wallow in poverty.
Nigeria’s debt situation as it is presently risks asphyxiating economic growth if decisive action is not taken immediately.
> President Tinubu’s administration has a chance to break from the costly debt addictions of the past. Unless it seizes this moment decisively, Nigeria may be condemned to another lost decade of stunted potential and diminished living standards for its citizens. The time for far-reaching action is now.