Nigeria’s current debt profile of about N31 trillion is unfortunately not sustainable, Dr Paul Alaje, a Senior Economist with SPM Professionals has said.
DR Alaje stated this in his lead paper presented at the just concluded Annual General Meeting (AGM) of the Finance Correspondents Association of Nigeria (FICAN) held virtually in Abuja.
I am not the first person to say it, IMF has continued to mention that Nigeria’s debt profile is not sustainable.
Nigeria’s total debt profile rose to N31. 009 trillion as of June 30, 2020, says the Debt Management Office (DMO).
He posited that several factors were responsible for debt unsustainability, but the major factor is devaluation.
“It is not sustainable because when you look at a number of factors, one of those factors is devaluation. Devaluation happened last year from N306 official figure to N379 according to CBN.
He noted that a quick comparison of they posted early last year and what they posted this time last year you will see that we have devalued. when you study debt management publication carefully, you will see that because of devaluation 2 times Nigeria has added 1 trillion Naira to debt for borrowing nothing and I will tell you why. This is because when you look at foreign component of our debt and the conversion to naira, because we devalued and we borrowed in dollars that its self will make our debt profile to increase and we are still going to service them at the same rate because the rate of servicing has not reduced.
“When you look at revenue over the years, it appears the revenue is growing but revenue is actually not growing but reducing when you look at it in real terms. That is when you make provision for inflation devaluation that has happened over the years you will see that in the real sense revenue is reducing. When you look at our disposable income all of us, how much did we earn last year, how much are we earning now, how much are we buying petrol? The same thing that affects us as individuals, household is what affects them and as a matter of fact it is the same thing that affects our government.
He observed that revenue continues to reduce for government even though the face value, the nominal value appears as if revenue is increasing and we have not drawn a strategy.
“I have read the strategy document as to how we will now continue to reduce borrowing and improve revenue generation that is what is missing. Until we are able to do that, to see how we are going to translate either revenue generation we can’t continue to compare ourselves with large economy that has capacity to generate revenue”, he 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 if you want to juxtapose what they are owing us and what we are owing other countries, where is the relationship and what asset do we have and 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” that is why they stood on that as a condition.
In response to a question whether Nigeria should stop borrowing, the erudite Economist said Nigeria should not stop borrowing completely “but we need to reduce the rate at which we borrow, we cannot stop borrowing overnight.
He recommended that instead of looking at increasing borrowing to service debt which laziness promotes, stressing that Nigeria’s debt strategy should be how we will reduce borrowing over the period of time and have increased revenue.
“There are quite a number of things we can do even apart from revenue. Most important thing which is long term, which I doubt we will be able to do it in 2 or 3 years is promote development. Development promotion will naturally bring more revenue to government. I give you an instance that about 30 million pupils in Nigeria, President Buhari has been all out saying he would achieve 10 million jobs per year i.e., 100 million jobs the first time that was mentioned for Mr. President and it became public to me was 12 July, 2019, president repeated it in 12 July, 2020 that he will take more people out of poverty. When different organization UNDP, IMF, Word Bank had published that Nigeria continues to build more people that are poor, the president had responded in a statement saying he is going to lift 100 million people out of poverty, bringing it to this.
“I realized in fact according to IMF from July to December, 5 million Nigerians joined poverty line. That is exact opposite of president Buhari’s vision, so instead of working in line with policy direction we are working directly opposite policy direction and for us economist what we bother about is result it is not just policies that are breathing, it is what is the result. Now president Buhari has said is not wrong it is a good desire but he needs men that will ensure that the statement of Mr. President which is policy statement becomes a reality and how do I think this can be achieved?
They need to identify total number of schools or pupils wearing uniform, we have 30 million of them. As I talk to you today, more than 80% of those school uniforms (I’m talking of fabrics not the one they have sown) are still imported from India, from China and from East London and some schools take pride in saying that our uniform will be imported. So, if my child wears foreign school uniform will that make, he or she more brilliant? These are areas I want Mr. President and presidency as well as state government to look at, support textile industry.
He said the more we continue to promote industrialization, the more our people will get jobs the more parties will be paid which means state will not need to look to FG to borrow money.
