1 month ago
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NIGERIA is looking for favours again. During the recently concluded 79th UN General Assembly in New York, President Bola Tinubu asked the UN and developed world leaders to prioritise debt forgiveness for Nigeria and other developing countries from creditors and multilateral financial institutions. Tinubu’s motive for Nigeria cannot be faulted.
While the President’s campaign is legitimate, it overlooks a complex interplay of home-grown challenges from tax burdens to the high cost of governance which militate against the country’s economy and require his urgent actions.
Represented by Vice-President Kashim Shettima at the annual event, the President said, “We must ensure that any reform of the international financial system includes comprehensive debt relief measures, to enable sustainable financing for development. Countries of the global South cannot make meaningful economic progress without special concessions and a review of their current debt burden.”
The Tinubu administration inherited a debt-to-GDP ratio of 38 per cent. However, fresh borrowings and its failure to tackle fiscal challenges such as low crude output amid high government expenditure, and a sluggish GDP growth rate have pushed the ratio to 52.9 per cent. This figure exceeds the debt ceiling of 40 per cent prescribed by the IMF for developing countries.
Data from the Central Bank of Nigeria shows that the debt service costs consumed 74 per cent of the Federal Government’s retained revenue in the first quarter of 2024. In his Independence Day broadcast, Tinubu said debt servicing has reduced to 68 per cent. Unfortunately, this has robbed the country of social amenities, infrastructure, healthcare, and other developmental aspects of national life.
Nigeria benefited from a significant debt relief initiative during the Olusegun Obasanjo administration. When Obasanjo took office in 1999, the country’s debt stood at $28.54 billion. Through a series of strategic initiatives, Nigeria’s debt was significantly reduced to $2.11 billion.
Key to this success was the substantial reduction of domestic and foreign debts by 31.8 per cent, facilitated by agreements with foreign creditors, including the London and Paris clubs.
At independence, Nigeria’s debt stock was £17 million. The debt-to-GDP ratio fell from 75 per cent in 1991 to 7.3 per cent in 2008. Experts point out that due to the 2010s oil glut, the COVID-19 pandemic, the #EndSARS protests in 2020, the 2021 economic crisis, the 2021 Twitter ban, and the 2023 general elections, Nigeria’s debt soared.
Post-Obasanjo, Umaru Yar’Adua, Goodluck Jonathan, and Muhammadu Buhari in succession plunged Nigeria into the debt hole again without anything to show for it. In 2015, debt was $41.54 billion. Apart from the reckless Ways and Means borrowing under Buhari, debt grew to $98 billion in 2022. In the first quarter of 2024, Nigeria owed N121 trillion in domestic and external debts. This figure worsened because of the naira depreciation.
In addition to calling on international creditors to cancel debts, Tinubu should appraise the Nigerian economy and embark on reforms geared towards reducing the debt burden.
The Presidential Committee on Fiscal Policy and Tax Reforms has consistently advocated reviewing total taxes from over 50 to just eight, and the removal of withholding taxes and import duties for farmers and manufacturers. Tinubu needs to implement the recommendations of this committee.
The President should understand that debt cancellation goes together with a reduction in the cost of governance. The country’s creditors will not take his pleas for debt forgiveness seriously knowing that he recently purchased a $150 million presidential jet or that he spent N2.3 billion on international trips and related expenses.
The government should privatise the commanding heights of the economy to gain liquidity and intensify efforts to boost the domestic production of petroleum products.
