Redirect Nigeria’s penchant for loans

There is palpable fear over Nigeria’s fiscal terrain in the light of the country’s seeming fixation with, and recourse to loans for literally every conceivable national challenge. This is even as there is an increase in revenue for the government from a regime of new and old taxes as well as tariffs. Just Beyond the […]

There is palpable fear over Nigeria’s fiscal terrain in the light of the country’s seeming fixation with, and recourse to loans for literally every conceivable national challenge. This is even as there is an increase in revenue for the government from a regime of new and old taxes as well as tariffs. Just Beyond the foregoing is the syndrome of diminished transparency over the deployment of such largesse.

For instance, since the President Bola Tinubu administration came on board two years ago, it has indulged in several borrowing initiatives, which include the $21.5 billion deal, which was recently approved by the National Assembly. Also on his watch is the $2 billion foreign currency bond, as well as the N757.98 billion bond for settling the outstanding pension liabilities under the contributory pension scheme. Just as well, the World Bank recently granted a loan of $300 million to Nigeria –purportedly for addressing the welfare challenges facing the 1.3 million Internally Displaced Persons (IDPs) who are of course victims of the country’s long running battle against insurgents, and their host communities. Meanwhile, the Debt Management Office (DMO) reported that by the end of 2024 (Tinubu’s first year in office), Nigeria’s total debt was N144.7 trillion comprising N74.4 trillion (51%) as domestic component while N70.3 trillion (48.6%) constitutes foreign component.

Meanwhile, even as the government is indulging in debts, it seems to be acting in denial of the revenue potential of the country, which on the flipside is the growing revenue base of the country. Put in context, two scenarios are playing out.

First is the complement of humongous gains from the withdrawal of the fuel subsidy. Second is the increasing level of revenue of the federal government, as several revenue generating agencies report higher levels of collectibles, courtesy of increased taxes in one form or the other.

While there is hardly anything intrinsically wrong with any government-including Nigeria’s- to engage in borrowing for resolving significant   national challenges, the circumstance justifying such must qualify as valid.

However, when such an indulgence occurs without justification, the situation amounts to double jeopardy for the country, through the pain of avoidable debt servicing in the present, as well as a rape on its future well-being.

Hence, not a few observers have expressed concern over the government’s seeming disposition towards a debt-driven economic recovery plan, instead of the consensus on a home-grown recovery plan for the country, which de-emphasises dependence on debts. This is especially so given the silver lining in the country’s finances, with some revenue generating agencies harvesting encouraging inflows, courtesy of the new regime of taxes and tariffs.

To accentuate the incongruity of the government’s misplaced fixation on loans, a recent report by the International Monetary Fund (IMF) on Nigeria‘s economic direction, hinted at signs of recovery as it projected a mark up to 3.4 per cent real GDP growth for Nigeria in 2025, which is an increase from its previous forecast of 3.0 per cent. This revision reflects a more optimistic outlook on Nigeria’s economic prospects, due to reasons the institution cited as ‘stronger global financial conditions, reduced trade barriers, and resilient external demand. The IMF report also highlights the potential for further growth to be driven by increased oil production, the commissioning of the Dangote Refinery, and a strong service sector. This is also as it cautions about potential risks like oil price volatility and external financing shifts (financial booby traps), whose telling effect is always on the country’s capacity to manage debt obligations.

Of concern is that in spite of the incipient turn around in the country’s finances, hardly do the citizens feel the relief. Food prices are still high with hunger still gripping them. General public service delivery is still poor.  Infrastructure is still in a dilapidated state across the country.  The only evidence of where the money goes to is in increasing of allocation to state governors and salaries of selected public office holders.

We at the Daily Trust believe that against this backdrop of the incongruity of the situation, that a revisit of the country’s dalliance with loans needs to be made. And in this respect, the National Assembly needs to be alive to its responsibilities as the situation clearly reflects its failure of oversight function. The Constitution assigns it the power and responsibility to oversight the executive arm with respect to the administration of the nation’s finances. By the same token, the National Assembly has the power to investigate the disbursement of the finances of the country, towards the realignment of the country’s fiscal terrain with expectations of the citizenry which are in conflict with the fixation with loans. It must rise to this duty.

Nigeria’s dalliance with debts has always taken such a substantial toll on the nation’s fiscal circumstances as to dictate a more discretionary disposition towards future loan. This is the best time for such a dispensation.