Finance: Nigeria in the Throes of Fiscal Crisis

Finance: Nigeria in the Throes of Fiscal Crisis

As diverse indicators that measure governance and economic performance recently revealed, Nigeria is truly in the eye of the storm. First, its unity is hanging loosely in the balance. Accordingto the International Crisis Group (ICG) and Strategic Studies Institute (SSI), this is due to the increase in activities of divisive forces nationwide. Its effects,  as shown in their reports, placed the polity in bad shape.  

However, the problem of Nigeria appear more complex than most analysts think. The Acting Accountant-General of the Federation (AGF), Mr Anamekwe Nwabuoku had beamed light into the depth of the country’s gnawing multifarious crises at a retreat of public finance experts in Abuja.. The retreat was organized to consider a policy alternative to borrowing. The AGF acknowledged Nigeria’s inability to pay salaries, which according to him, is absurd. He identified dwindling revenues as a dominant factor that compelled the federal government “to explore other sources to augment  the payment of the salaries of federal public servants.”  According to the AGF, the federal government should not embrace borrowing to meet its recurrent obligations at a time of the historic rise in crude oil prices worldwide. But this has been the reality of Nigeria’s fiscal environment under President Muhummadu Buhari, about two decades after former President Olusegun Obasanjo negotiated debt relief for Nigeria.

As shown from  in the  records obtained from the Debt Management (DMO), the financial  crisis did not start under Buhari’s administration. In 2007, for instance, the debt relief crashed the external debt to $3.65 billion, apparently from the $31 billion it owed Paris Club and $5 billion it owed London Club. However,  its domestic debt then stood at about $18.57 billion for the entire federation. 

The debt trajectories portrayed Nigeria’s relapse to borrowing just after the end of Obasanjo’s administration. Under the administration of President Umaru Yar’Adua, for instance, Nigeria’s total public debt rose from $22.23 billion in 2007 to $35.09 billion in 2010,  an increase of 57.84 per cent.  This trend continued during the era of President Goodluck Jonathan. From $35.09 billion in 2010, the country’s debt escalated to $65.43 billion in 2015. This represents an increase of 86.46 per cent. Under Buhari’s administration, according to the debt records, public debt steadily increased by 52.97 per cent to $100.09 billion in March 2022.  

When the AGF confirmed this position at the Abuja retreat, it attracted debates and concerns among analysts nationwide. Some had argued that the rising debt profile had placed Nigeria in an extremely weak fiscal position. The ugly trend, as others believed, could push the Federation into the abyss of bankruptcy if not well managed. 

However,  the DMO shared an entirely different view for two reasons. First, the debt stock only represents 23.27 per cent of the GDP, which the debt office said, is still below a 40 per cent national threshold. Second, diverse policy initiatives aimed at growing and diversifying revenues are yielding results. By implication, according to the debt office, the debt stock is not beyond what Nigeria can sustain. Notwithstanding the assurance of the DMO, the revelation has continued to generate reactions from Nigerians.  The pertinent question is; ‘what then could have pushed the Federal Government into so much debt after President Obasanjo had secured $20 billion debt relief for Nigeria from Paris? In addition, what again brought Nigeria into the debt trap amid highly-priced assets, which according to the Chief Executive, Economic Associates, Dr Ayo Teriba, could be harnessed to meet the country’s capital and recurrent needs. 

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