Regardless of what the current managers of the Nigerian economy will lead the nation and its citizens to believe, it is not the best case scenario as the debt profile continues to soar in the face of falling incomes. If Nigeria were a business, the next available option would be to file for bankruptcy. Nigerians were understandably alarmed to note that for the first quarter of 2022, the cost of servicing debt exceeded revenues by 310 billion naira, clearly suggesting that Africa’s most populous nation may well be going through a Debt crisis.
We recall with a sense of calm that while the nation’s total expenditure for 2022 was estimated at N17.32 trillion, at the end of April, when an income of N5.77 trillion was expected, what the nation got as undistributed revenue from the government would have been 1 naira. 63 trillion. During this period, actual government expenditure amounted to N4.72 trillion; 1.94 trillion naira on debt service and 1.26 trillion naira on personnel costs, leaving only 773.63 billion naira for capital expenditure.
According to the Debt Management Office (DMO) report, at the end of the second quarter of 2022, the country’s total outstanding public debt stood at N41.6 trillion. It was only recently that the International Development Association, an international financial institution, also a member of the World Bank Group, which provides concessional loans and grants to the world’s poorest developing countries, ranked Nigeria ranked fourth on the list of most indebted countries.
The IDA financial statements revealed that with a debt of $13 billion as of June 30, 2022, Nigeria is the fourth most indebted country. Of course, the latest ranking showed that the country has taken a step up from the fifth position it occupied in 2021. It should be noted that the IDA debt is different from the $ 486 million owed to the Bank International for Reconstruction and Development (IBRD).
It is significant, in our view, that in the IDA Top 10 list, where Nigeria ranks fourth, are India, Bangladesh, Pakistan, Vietnam, Ethiopia, Kenya, Tanzania, Ghana and Uganda. Without any fear of contradiction, the nation is in dire straits and no guarantees from the government, especially the Debt Management Office, can erase this fact.
With rising inflation and the cost of living pushing many people into poverty, falling incomes and soaring debt servicing, IDA’s latest report is, for to say the least, very disturbing and clearly suggests that urgent action must be taken to stop the nation’s continued descent into the debt trap.
Is the current spending trend sustainable? Shouldn’t the government drastically reduce its spending, including the salaries of political office holders? In the opinion of this newspaper, the time is long overdue for the nation to take a critical look at its sources of debt and, ultimately, to re-evaluate how borrowed funds are spent. This assumes that without recourse to political consideration, a concrete decision on the gasoline subsidy, which has remained one of the country’s major revenue guzzlers, must be taken and very quickly too. Indeed, the gasoline subsidy is not sustainable.
Without wishing to sound alarmist, we dare to say that the situation looks grim. The Lagos Chamber of Commerce and Industry (LCCI) summed up the scenario succinctly when its President, Michael Olawale-Cole, noted: -2025 will be missed as we continue to experience unprecedented levels of blockchain disruptions. agricultural supply and production.
It must be said with some finality that difficult times such as these demand that the government initiate reforms that will revive the obviously contracted economy by providing critical infrastructure that creates jobs, resolves the deplorable security situation and genuinely works on the ease of doing business to stimulate investors. trust. In addition, the government must also consolidate its efforts to diversify the economy.
We are not oblivious to the fact that huge expenditures are being incurred to deal with the raging security challenge that threatens the nation. It is regrettable, though unavoidable, that enormous resources, which should have been allocated to the strengthening of essential infrastructure, are devoted to security.
However, more than ever, the government must demonstrate its willingness to spend more on productive infrastructure and resist the urge to waste borrowed money to subsidize consumption. We point out that there is no harm in borrowing. It all depends on the use of the borrowed money. There must be a positive change of direction if the government is serious about saving the nation from an avoidable economic crisis. Hurry up.