Burden of national debt on future generations

We live in a country where the acquisition of debt has become as easy as preparing pepper soup. It has always been the way of life for Nigerian governments to borrow since the 1980s. Almost a year ago, the Minister of Finance, Kemi Adeosun, complained publicly that Nigeria’s huge do-mestic and foreign debt was becoming unsustainable, and that the Federal Government (FG) should show caution borrowing. At the time the Minister spoke, only economists would have understood her frustration especially when the nation was barely coming out of economic reces-sion. For politicians in the government, the Minister was only generating noise. Yes, many poli-ticians in the government will consider the Minister of Finance as a noise maker because of sev-eral reasons: Firstly, Nigeria is an oil producing country. So why bother? There would be US dollars to repay the loans borrowed. Secondly, the country needed money to provide infrastruc-ture for 200 million people. Since China has told those in the government that what Nigeria needs for economic emancipation is infrastructure! Infrastructure! Infrastructure! Why can’t Nigeria borrow funds to provide infrastructure? Thirdly, other regimes borrowed; why can’t the APC-led government also borrow?
Over the years, Nigeria’s national experience with huge foreign debt has not been a pleasant one. In the past three decades, Nigeria has found itself in a precarious situation twice when it was un-able to either service or repay its domestic and foreign debts. On those occasions, the country would have almost been technically declared bankrupt. It was ex-president Olusegun Obasanjo’s (OBJ’s) regime that bailed the country out of its debt. It’s unbelievable that Nigeria’s debt which was written off by the Paris and London Clubs barely ten years ago during OBJ’s regime is now N22.73 trillion (US$ 66.70 billion), according to the Debt Management Office. Out of this debt, the foreign component is US$ 17 billion.
Since OBJ left the villa, the country has been going abroad to borrow funds to finance annual budget deficit and for infrastructure development. In fact, China is Nigeria’s major lender and it’s one of the few countries willing to lend money to Nigeria. With the debt burden, Nigeria was advised recently by the International Monetary Fund (IMF) that the country’s debt level would create some vulnerabilities, if not checked. The Bretton Wood Institution further advised that vulnerabilities in the economy would create financial instability as time goes on.
To justify the huge debt, policy makers argue that Nigeria’s debt to Gross Domestic Product (GDP) ratio is low in comparison to that of developed nations. And that Nigeria needs funds to improve the nation’s infrastructure. Yes, it may sound brilliant for policy makers to compare Ni-geria’s debt to GDP ratio to that of developed nations. But those developed nations with high debt to GDP ratio being referred to have sustained economic growth and highly productive econ-omies with high revenues to boot. There is no need comparing Nigeria to developed economies when it comes to debt to GDP ratio because those countries in the latter category are more pros-perous nations. These are nations whose societies and economies use more advanced technologies in everyday life and economic production activities.
In the case of Nigeria, it is an import-dependent economy and the seventh most populous nation with a human development index that evokes no admiration. Nigeria has the largest number of children out of school in the world coupled with high mortality rate, and soaring unemployment figures. In the face of these challenges, Nigeria expends about 66 percent of its revenue to service its debt, according to policy analysts. What then is the implication? With rising population and fragile economy, one may not be incorrect to say that the future of Nigeria is murky as a result of huge debts. There is hardly anything to show for being an oil producing nation with almost 200 million people. If there was accountability and transparency, one would have expected successive governments to justify huge loans the country took in the past. Rather than use loans to create enabling environment in which businesses would thrive, most firms in Nigeria have laid off some of their staff because of the political uncertainty and lack of infrastructure.
If OBJ had not taken a bold and courageous step to liquidate the country’s foreign debt of US$ 18 billion in 2007, Nigeria’s debt profile would have been worse now and virtually unsustainable. Servicing a huge national debt with 66 percent of the federal government’s revenue is not sustainable. One may argue that there is nothing wrong in borrowing for projects especially when the nation’s economy is fragile. But we need those in the government to be accountable, transparent, and not wasteful.
Drawing inspiration from the scriptures, we are in a world where the rich rules over the poor and the borrower is servant to the lender. A debt of US$ 66.7 billion is huge for a nation recently la-beled as the poverty capital of the world. The DMO has been releasing warning shots in the last three years that Nigeria has moved from a low-risk debt distressed country to a medium-risk debt distressed one. For an agency of the federal government to make repeated warnings, calls for concern. Such warnings must be given the attention it deserves. If Nigeria sustains huge debt profile without appreciable infrastructure, it will definitely pose a financial burden to the coun-try. The implication is that the country has a financial portfolio highly sensitive to external shocks. It is the country’s responsibility to ensure that foreign loans are tied to projects. No mat-ter what happens, the lender will get its money back even when it has been squandered. Nigeria should slow down the rate at which funds are borrowed. We should not continue to mortgage the growth and prosperity of future generations on the altar of debt. Future generations deserve something better from us but not a nation crippled by huge foreign and domestic debts.

 
MA Johnson