‘Nigeria’s Debt Rose By N1trn Without Borrowing’
By devaluing the naira, Nigeria has added N1 trillion to her total debt without borrowing.
The devaluation of the naira and an opaque revenue-generating strategy have contributed to make Nigeria’s debt unsustainable.
Senior Economist with SPM Professionals, Dr. Paul Alaje, spoke at the Annual Forum of Finance Correspondents Association of Nigeria (FICAN) in Abuja at the weekend.
According to Alaje, “devaluation happened last year from N306 official figure to N379 according to CBN, now when you study debt management publication carefully, you will see that because of devaluation, Nigeria has added N1trillion to debt for borrowing nothing
“Looking at the foreign component of Nigeria’s debt and the conversion to Naira, Nigeria devalued and borrowed in dollars that its self will make our debt profile to increase,” he said.
Interestingly, Nigeria will still service this debt at the same dollar rate it borrowed the money because the rate of servicing has not reduced.
He noted: “When you make provision for inflation and devaluation and you look at revenue over the years, it appears the revenue is growing but revenue is actually not growing it is actually reducing when you look at it in real terms.”
Alaje lamented that Nigeria’s strategy to reduce borrowing “does not adequately address how to generate revenue. Until we are able to do that, we can’t continue to compare our selves with large economy that have capacity to generate revenue”.
Alaje said: “Some of them are owing but countries are also owing them. The question is who is owing Nigeria and how much are they owing us? And and what asset do we have, that is why China says “for us to lend to you, you must present some level of sovereign guarantee which means you will allow us come to your country to take away our asset because your asset are weak”.
The unsustanability of Nigeria’s debt is further compounded by the fact that a large chunk of the country’s debt are commercial loans, euro bonds; treasury bills. “Who will forgive treasury bills and bonds?” he asked.
“Who will forgive us of euro bonds? These are commercial loans unlike the one we have with Paris club and some other international organisation” he said,
“The borrowing is not free, when we keep borrowing, we are going to be paying back and the burden will be so much on our national revenue so we now have less revenue to spend,” he explained.
The solution he said rests on two options, “it is either we expand revenue which we have not figured out right now or we keep borrowing more”.
Alaje insisted that Nigeria “cannot continue to borrow more and expect a difference or a change to happen suddenly. Nobody lends to a commercial business or a firm, an organisation because their balance sheet looks good every body borrows because of ability to pay back. The question is do we think Nigeria, based on our revenue today have ability not just to service but the ability to pay back? The answer is No.
For Nigeria to generate needed revenue, governments at both state and federal levels he said should plug leakages and think of new ideas of generating revenue other than the traditional ways.
According Alaje, “the former administration were advised to build telecom masts so that telecom operators will come and operate, today, average revenue per telecom mast per day is about N7.5 million. Multiply that by 365 days, multiply that by 50,000 telecom mast standing in Nigeria, just one window.”
To plug leakages, he said, “we realised that individual government staff have been the ones collecting revenue from people, no receipt no information. In fact, some of the biggest telecom, have outstanding up to about millions and hundreds of millions, and billions and hundreds of billions of naira government does not even know”.
“The unfortunate thing is that you don’t even know that your revenue is leaking, once some monies which is becoming peanuts by the day is coming from Niger-Delta and FIRS can contribute its own, you are fine,” he lamented.
Alaje warned: “Custom revenue will drop with AfCFTA so when that happens, government will need to be innovative we need to look inward rather than borrowing, NBS told us that telecommunications sector is fastest growing in Nigeria right now, the question is why is government revenue from telecom sector not growing? That means we are not even growing our economy the way at which sectors are growing.”