Massive Borrowing Puts Nigeria’s Future at Risk

Massive Borrowing Puts Nigeria’s Future at Risk

Tuesday, August 16, 2022 9:27 pm

Professor Ebenezer Obadare


By Ebenezer Obadare

Among the many dangers threatening the very foundation of the Nigerian state is the government’s increasing reliance on internal and external borrowing to finance its operations. In recent weeks, various international organizations, private entities, senior government officials, and former government functionaries have decried the Buhari administration’s appetite for borrowing, and warned about the risk to the Nigerian state of allowing the situation to get out of hand. These include the International Monetary Fund (IMF), which projected that “the Nigerian government may spend nearly 100 percent of its revenue on debt servicing by 2026;” the World Bank, which warned that the country’s debt, while seemingly sustainable, is “vulnerable and costly;” and the Nigerian Economic Summit Group (NESG), a body of private sector leaders, which warned against what it saw as the prospect of creating “a debt burden for future governments.”

Last week, former Deputy Governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, joined the chorus, indicting the leadership of the country’s apex bank for bowing to political pressure and “printing money for the government through illegal Ways and Means lending.” Incidentally, this is not the first time that the Nigerian government has been accused of printing money illegally. Last year, Governor of Edo State Godwin Obaseki claimed that the Federal Government printed “N60 billion as part of allocation to states for March 2021,” an allegation promptly rejected by the authorities.

The gravity of Nigeria’s debt situation is captured by the following statistics. Between 1999 and 2021, local and external federal government borrowings jumped from N3.55 trillion to N26.91 trillion, an increase of 658 percent. While much of that increase has taken place under the Buhari administration (for instance, it has overseen a 291.37 percent rise in foreign debt alone), it is by no means the only culprit. While external debt declined from $28.04 to $2.11 during the Olusegun Obasanjo era (1999- 2007), it rose under the successive Musa Yar’Adua and Goodluck Jonathan administrations. Under the latter, “the federal government component of the total public debt increased from N6.17 trillion in 2011 to N9.8 trillion in 2015,” a 58.8 percent jump. With a total public debt stock of N41.6 trillion, Nigeria’s debt to GDP ratio currently stands at 23.27 percent.

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