On the Spot with Eric Teniola

November 27, 2018

The huge debt burden and how we got there

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By Eric Teniola

NIGERIA’S debt stock increased by 3% from the N21.68 trillion recorded in December 2017 to N22.4 trillion recorded in December 2017 to N22.2 trillion ($73.21 billion) at the end of June 2018.

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Patience Oniha, the Director-General, Debt Management Office, DMO, made this known at a media briefing session in Abuja on Tuesday, August 14, 2018. She said that the nation’s debt stock decreased by 1.44% from N22.7% trillion recorded in March 2018 to N22.38 trillion  in June 2018.

The decrease was largely due to a 3.38% decline in Nigeria’s domestic debt stock between March and June 2018. There was also a marginal increase of 0.07% in the external debt stock and 2.75% in the domestic debt of states.

But speaking on October 28 at the 9th public lecture of Sigma Club at the International Conference Centre, University of Ibadan, the Vice President, Professor Yemi Osinbajo, said that the nation’s debt was $73billion, a $10billion increment from $63billion the present administration inherited in 2015.

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“In 2010 our debt was $35 billion; $41 billion in 2011, $48 billion in 2012, $64 billion in 2013, $67.7 billion in 2014, $63.8 billion in 2017 and 73 billion in 2018.

“The nation’s debt as at today was $73 billion, an increment of $10 billion from the $63 billion inherited in 2015,” he said. There is nothing wrong in securing a debt. But there is everything wrong if you cannot justify what you have done with the debt, either as an individual or a company or as a nation.

And the sad thing is that the money that we borrowed now as foreign debt have been re-looted  back to Europe, America and Asia by our leaders making us, our children and grandchildren to face the future as perpetual captives. We are talking about a country where, especially in the rural areas, there is no government presence—a clear indication of a failed state.

We are talking about a country that survived a civil war between 1968 and 1970 without borrowing a single Kobo. Available records show that Nigeria did not borrow during the era of General Yakubu Dan Yuma Gowon from 1966 to 1975. In fact, record shows that the country did not borrow a Kobo during the short era of General Murtala Ramat Mohammed from July 1975 to February 13, 1976.

We are talking about a country which the British Prime Minister Theresa May, on August 28th this year described thus: “Much of Nigeria is thriving with many individuals enjoying the fruits of a resurgent economy, yet 87 million Nigerian live below  one dollar and 90cents a day, making it home to more poor people than any nation in the world”. We are talking of a nation which the former Minister of finance, Mrs. Ngozi Okonjo-Iweala said earned $61.7 billion between 2011 and 2014.

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Nigeria’s foreign indebtedness started during the military regime of General Olusegun Obasanjo in 1977. The government first borrowed N600 million ($1billion) which was followed with another huge borrowing of N734 million ($1.456 billion) in 1978. Thereafter, there was borrowing by both the federal and state governments which later aggravated the Nigerian debt problem.

Presenting his first budget to the National Assembly on July 1, 1980, President Shehu Shagari said : “As at September 30, 1979, the last day of the military regime, the overall financial position of the Federal Government showed  a deficit of N1.4 billion (N1,403,621,928). The Federal Government was not alone in this dilemma.

The state governments were in the same predicament and were likewise unable to meet their contractual obligations and, naturally, this affected the performances of the economy generally both in the public and private sector. On the external front, our debt rose to N364 million in 1978/79”.

On Thursday December 29, 1983, a few hours before he was toppled from power, President Shehu Usman Shagari presented the 1984 budget at the National Assembly, Race Course, Lagos.

He said: “An objective of Government policy during 1984 will, as earlier indicated, be the improvement in the balance of payments and reserves position. Accordingly, out of the estimated foreign exchange earnings of N8.562 billion during 1984, N562 million will be set aside in order to raise the level of external reserves from its present level of less than a billion naira to N1,464 billion at the end of 1984.

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The balance of N8.0 billion will, therefore, be available to meet the country’s projected foreign exchange commitments during the year. Of this amount, N3.0 billion will be utilised in servicing external loan commitments while N5.0 billion will be applied to pay for the importation of raw materials, machinery and spare parts, essential commodities and other items in the current account section of the balance of payments”.

A few days after taking over power, Major General Muhammadu Buhari addressed the world press on January  5, 1984 at Dodan barracks, then the seat  of government. I covered the event. He declared on that day thus: “With respect to State Governments, available data for 1980-82 showed that their combined budgetary deficits rose from N3,295.6 million in 1980 to N4,882.6 million in 1981 and N5,373.1 million in 1982. In relation to the nation’s total input, the budgetary deficits of the Federal Government increased from 3.7% of the non-oil G.D.P.  at current prices in 1977 to 9.3% in 1978.

The recorded total deficits of all Governments increased from 16.6% in 1980 to 31.9% in 1982. The budgetary deficits were financed by either internal or external borrowings or both. Invariably, this led to a rapid accumulation of public debt whose internal component increased from N4, 635.9 million to N15,010.5 million from 1977 to 1982 and to N22,221.44 million for 1983.

The indiscipline in the former Governments’ spending pattern was even more pronounced in the external sector of the economy. The seriousness of this country’s propensity to import is reflected by the fact that out of every N1 of new money created, about 68 kobo is spent on imports.

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At N12,565.5 million in 1982, imports were N5,471.8 million and N3,469.9 million higher than the levels in 1977 and 1980. External debt outstanding thus increased from N1,137.0 million in 1977 to N5,341.2 million in 1982 and to N7,689.44 million for 1983.

The debt service ratio has also increased steadily at less than 1 per cent in 1977 to 8.9 per cent in 1982 and to about 30.5 per cent in 1983”.

Again on April 7,  1984, General Buhari told the nation in a broadcast to mark his one hundred days in the office “negotiations are in progression to re-finance Nigeria’s short term trade arrears estimated at N3.64billion (US $4.5 billion). Export credit agencies with insured arrears in the U.S.A., U.K., France, Western Germany, Italy and Japan have been generally receptive to a request for a review and rescheduling of Nigeria’s foreign commitments provided negotiations for an IMF programme, including a devaluation of the Naira are successful. Uninsured creditors with arrears totaling over US $2billion have accepted re-financing proposals in principle, negotiations for an IMF programme continue”.

On May 7, 1984, while presenting the 1984 budget, the General declared: “our total external indebtedness as at 31st March, 1984 stood at N8.30 billion approximately. The total commitment is N17.46 billion, out of which N9.80 billion has been drawn down. Repayments total N1.50 billion. Federal Government’s total of drawing less repayments is N5.31 billion. The figure for the State Governments is N2.98 billion”.

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Inspite of the draconian measures through decrees and policies, our debt burden kept increasing. There was even stalemate between the Nigeria government and the International Monetary Fund over the debt issue. On August  27, 1985, Major General Muhammadu Buhari was overthrown by his Chief of Army Staff, Major General Ibrahim Babangida.