19th August, 2013
Nigeria’s Minister of Finance, and coordinating Minister of the Economy, Ngozi Okonjo-Iweala, revealed a few days ago that Nigeria’s debt profile is on the rise again. The country’s domestic debt figures has swollen to over N6 trillion, being serviced at high interest rates. Consequently, resources that should have been channelled to other pressing demands are committed to debt payments. This is worrisome.
More worrisome is the fact that the huge debt is mainly for consumption and not for productive purposes with prospects of life enhancing and profitable returns. Between politicians and public sector workers, 70 percent of government expenditure goes to about less than 5 percent of the population.
Financial and economic development experts have advocated for an urgent need to reduce over-dependence on oil by developing the non-oil sector to generate more revenue for the three tiers of government and evolve measures to curb revenue leakages.
It is apparent that Nigeria’s mono-cultural economy that relies mainly on oil is no longer sustainable, particularly as demands for infrastructure and sundry developments are constantly on the rise with limited funding sources. Most states, with financial constraints caused by meagre internally generated revenue, resort to endless borrowing even as they lack the capacity to service the loans.
The Federal Government must monitor the nation’s debt stock to keep it low. It should increase the vigilance required to ensure debt is reduced to create room for the private sector to operate. A main priority should also be the monitoring of external borrowing to ensure that the country does not slip back to high indebtedness as was the situation prior to to the era of quest for debt relief sought by the President Olusegun Obasanjo administration.
A comprehensive and transparent approach should also be adhered to, concerning the external borrowing plan. And while that is ongoing, resources must equally be committed to paying off the debt to prevent frustrating the lending institutions.
Also through close monitoring by the Finance Ministry, debt burden of state governments can be kept within manageable levels with borrowing channelled to specific projects that yield results for citizens of the states.
In this regard, banks and other lenders should equally be cautious and prudent when lending to ensure loans are granted strictly within existing rules, regulations and guidelines.
Above all, it is about time the Federal Government stepped up attempts to create multiple streams of revenue generating channels while states should also aggressively pursue increased internally generated funds. The triple digit oil price which Nigeria hitherto depended upon has also encouraged the development of the U.S Shale oil, which presently competes with OPEC’s crude. This has already started to impact negatively on Nigeria’s finances, prompting market diversification and sales to Asia. The near future may hold a worse fate for a strictly oil dependent state like Nigeria.