Checking Nigeria’s Rising Domestic Debt

Recently, the Debt Management Office (DMO), said in an annual report on its website that Nigeria’s external debt increased by 6.2 per cent to $3.95billion while domestic debt rose to $21.8billion from $17.7billion.

In the same vein, the nation’s total debt rose by 21 per cent in 2009 to $25.8billion, which represented 13.8 per cent of the country’s Gross Domestic Product (GDP), the DMO report revealed.

It said that 85 per cent of the nation’s public borrowing was from the domestic market last year alone while 15 per cent came from abroad with the local component representing 83 per cent of total borrowing.

Since the former finance minister, and current Managing Director of the World Bank Group, Dr Ngozi Okonjo-Iweala played a major role in Nigeria’s 2995 Paris Club debt relief deal; it would appear that the country has still not learnt to apply the brakes in both external and domestic borrowing.

Worried by the development, Okonjo-Iweala recently raised an alarm in which she warned that if the Federal Government does not watch the rising domestic debt profile, Nigeria’s growth may be stagnated.

Speaking to journalists during the 2010 World Bank/International Monetary Fund annual meetings two weeks ago in Washington, DC, the United States capital, the World Bank managing director said Nigeria must at the present level of domestic debt, stop its accumulation to prevent unfavourable consequences.

Clearly, not much has changed, post-2005, when Nigeria exited the debt trap. The conditions that led to that debilitating debt problem still exist, and Nigerians must resolve to address them comprehensively and patriotically.

One of the problems remains the near absolute dependence on oil revenue, which as it were, plays tricks on our economy. In one breath, the oil money encourages our bureaucrats to accumulate whatever debt they can, believing Nigeria can pay. In another breath, the fluctuating prices of crude oil in the international market, when it dips, throws a spanner in the works of our domestic planning, thus hindering national growth.

This makes the need for the diversification of the nation’s revenue sources an imperative, especially the development of the nation’s agricultural potentials, the manufacturing sector and exploitation of her mineral resources, with which, she is abundantly endowed.   

The endemic corruption in the political class is another factor in the nation’s penchant for debt accumulation.

Since very few people in the corridors of power are there to serve, the majority, who are there to enrich themselves and their families, even to succeeding generations, unabashedly corner the commonwealth, thereby stunting national development and compounding the nation’s debt problems.

When our lawmakers at all levels corner the lion share of recurrent budgetary allocation, contracts are inflated, paid for up-front, and abandoned while capturing political power becomes the easiest way to wealth, then the nation’s finances must expectedly be in crisis.

In addition, the docility of the populace with regard to making public officials accountable is another factor in the management of the nation’s finances. Conditioned by the pervasive corruption in the land, the attitude of the average Nigerian to the corrupt and acquisitive tendencies of public office holders and politicians is ‘it is their turn, let them enjoy their loot’.

This must not be so. Intellectuals and civil society organizations, have a role to play here in collaborating with the media to raise critical questions on accountability by public office holders.

Perhaps, the most important factor in the debt management issue is the enormous cost of running the current democratic government. Obviously, more money is expended on recurrent expenditure than on capital projects.

Indeed, we have on hand a national crisis of the cost of governance, which should make government to reappraise its expenditure pattern so that it does not go borrowing to sustain profligate lifestyles of public office holders.

There is the need to sustain the economic fundamentals that would continue to make the Nigerian economy grow. There is the need for a fiscally prudent approach to the management of the nation’s resources.

Presently, a lot of spending is going on, and the nation’s fiscal deficit has risen from three per cent to six per cent of the GDP.

As Okonjo-Iweala warned, if accumulation is domestic debt is not stopped, private sector investment would be crowded out and the economy would be the worse for it.

 Therefore, the minister of finance, and the governor of the Central Bank of Nigeria must be guided by Okonjo-Iweala’s warning to adopt measures to check internal borrowing and bring down the nation’s fiscal deficit.

 The role of anti-graft agencies, including the Independent Corrupt Practices Commission, and the Economic and Financial Crimes Commission, remain relevant in checking the diversion and stealing of the nation’s fund, and bring public officers and others who defraud government and compound its financial problems to justice.

Above all, government is required to show the will to conduct business within the ambit of due process, and best practices while showing zero tolerance for those who, by their acquisitive tendencies, want to maroon the nation in economic stagnation and debt.   

Donald Mike-Jaja