Nigeria’s looming debt crises & climate change: Painful inheritance for future generations

Ogeri Eleri   As nations in the global South grapple with the mounting challenges of climate change and economic repression; it becomes imperative to examine the role of countries’ economic decisions in exacerbating or mitigating the twin problems of the climate crisis and rising poverty. Nigeria, as a populous and resource-rich nation, has faced significant […]

Ogeri Eleri

 

As nations in the global South grapple with the mounting challenges of climate change and economic repression; it becomes imperative to examine the role of countries’ economic decisions in exacerbating or mitigating the twin problems of the climate crisis and rising poverty. Nigeria, as a populous and resource-rich nation, has faced significant challenges in managing its debt burden, amid rising poverty, meeting development gaps and the worsening pressure from adverse climate change.

This article hopefully expresses the views and voices of Nigerian teenagers and children, who will be alive to bear the burden of Nigeria’s accumulating debt and suffer most of the adverse consequences of the effect of climate change in Nigeria and the sub-Sahara region if our policymakers and citizens at large continue to behave in the same old way.

This article delves into the interplay between Nigeria’s escalating debt burden, the pains of debt servicing caused by the mismanagement of credits-loans, versus the need to alleviate poverty through conscious infrastructural development decisions, however, compromised by the impact of climate change in Nigeria and the sub-region – all a painful inheritance for the future generation.

As a Nigerian teenager, whose future and those behind me are being mortgaged consistently by successive governments through rising international loans with little or no tangible sustainable infrastructural development to show; there is a need for my peers and age grade to raise our voices and demand caution and change in Nigeria’s debt management system and at the same time appeal for responsible implementation of Nigeria climate commitment.

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It is saddening that despite the problems caused by our anthropogenic activities on our environment, health, biodiversity and food security; our leaders in government, trade and other spaces are not paying attention and taking bold deliberate actions to turn the tides. Pride, ignorance, greed, corruption, and socioeconomic and environmental injustice continue to be the norm all over Nigeria. More than 45 percent of Nigerians are poor according to the 2018/19 national monetary poverty line, and 63 percent are multidimensionally poor according to the National MPI 2022. Multidimensional poverty is higher in rural areas, where 72 percent of people are poor, compared to 42 percent of people in urban areas.

Inflation in the country has consistently been on the rise, just like corruption and unemployment since the return of democracy in 2019. Over time, Nigeria has been bashed by the impact of climate change – consistent flooding, massive erosion, expanding desertification, increasing heat and reducing land mass for food production and food sustainability. The impact of climate change and poor socioeconomic decisions of the government is also evidenced in our poor development position globally, and rising debt burdens.

As of 2022, Nigeria’s debt reached an all-time high of NGN77 trillion. Over the past decade, Nigeria has experienced a notable surge in its debt levels. The debt to GDP ratio has more than doubled from 17.7 to 37.3 percent in 2022, and over 80 percent of the country’s revenue is being used to settle or service debt.

Spending over 80 percent on debt servicing leaves about 20 percent of the country’s revenue to be thinly spread across other sectors such as health, education, security, road, infrastructure, agriculture, social welfare, etc. While many academic research may argue that increased borrowing increases GDP and household income, this is obviously not the case for Nigeria as it is clear from statistics and the faces of the masses that increasing government debt and loans have amounted to increasing poverty, which can only be attributed to the poor fiscal management in Nigeria.

There are many factors fueling Nigeria’s debt crisis, the main one being fiscal mismanagement. The Nigerian government lacks fiscal discipline. The Fiscal Responsibility Act of 2007 clearly stated that the government at all levels might borrow only for “capital investment” and “human development”. This Act has been flouted over the years and efforts to amend some ambiguities in the Act has not succeeded over the year.

For instance, the Act prescribes the inclusion of “borrowing for important reforms of major national importance”. This is ambiguous and most often abused. The terminology is vague and increases the government’s borrowing power. The relevance of the Fiscal Responsibility Act is sabotaged by the lack of strict sanctions to enforce compliance. The Fiscal Responsibility Commission, just like other oversight Agencies in Nigeria lacks sanction power and is poorly supported. The existing fiscal structure in Nigeria somewhat promotes the lack of accountability, transparency and corruption. For instance, government Audit Reports from the Auditor General’s office are never made for public usage or access. Even the National Assembly and Presidency over the years have ignored this lack of transparency in a public report. How do we fight corruption without public audit reports? The Fiscal Responsibility Act also requires that borrowed funds be managed in a separate account to allow for proper monitoring and a clean spell out of what the debts are used for.

However, the norm has been to add the loans to the overall consolidated funds, without a clear public report on what capital projects are funded by the loans. It is sad that the only place where detailed progress reports of projects funded by loans, are the creditor websites, and never the Nigerian government or relevant MDAs public reports.

As the countries in the global West make strong efforts to shift away from crude oil and gas (a lesson well learnt from the Russia-Ukraine war) and the need to cut down on carbon emissions, Nigeria needs to rethink her over-reliance on oil revenue and our vulnerability to fluctuations in global oil prices.

With international oil prices and global crude oil demand on the low, the government is left with little or no option than to escalate and widen its domestic tax net on the already suffering masses and confront the dilemma of paying off accumulated debt or meeting the needs of the citizens through capital infrastructure development and social welfare.

Nigeria is largely dependent on the informal sector for GDP growth and revenue generation, especially in trade and agriculture, the impact of climate change on these sectors makes productivity a more herculean task. For instance, the economic value of the agricultural-related losses due to the 2022 flood was estimated to be about NGN700 billion.

The 2022 flooding situation damaged roads, bridges, and other transport networks, making it difficult for people to travel and for agricultural goods to be transported. According to the Centre for Climate Change and Development (CCCD), Climate change is already costing Nigeria $100bn per annum. This will amount to $460bn by 2050 if action is not taken to mitigate its effects.

The investment required to fulfill Nigeria’s developmental aspirations and climate-related obligations presents an unprecedented and formidable challenge.

In order to close existing gaps and alleviate the problem today, before they escalate into the future, the National Assembly should review the current institutional and legal frameworks that are relevant to debt management in Nigeria. For example, the ability to penalise and sanction violations of current fiscal laws and regulations should be granted to the Fiscal Responsibility Commission and the Debt Management Office.

Ogeri Eleri is a student of the Pan-Atlantic University Lagos and an intern at Heinrich Boell Stiftung, Abuja, Nigeria