Buhari Is Dangerous To Nigeria’s Economy ∼ By Odilim Enwegbara
PLUS: Tradermoni: The biggest fraud in our democracy
Today Nigeria spends 66% of its revenue on debt service. With this, is has become increasingly difficult to service and still have enough money to spend on government’s capital investments. Without equally growing the country’s revenues in proportion to its domestic debts, the country is approaching national debt crisis.
Nigeria’s debt service has grown so dangerously from its N943 billion in 2015 to N2.04 trillion in 2019. What makes our debts so dangerous is not that our debt to GDP is high. It is because the cost of debt service is unbelievably too high to be almost unheard-of. There is way the service could have grown so rapidly if not that the country’s debt profile has skyrocketed from N12.06 trillion May 2015 when Jonathan handed over to Buhari to N24 trillion in 2019.
What this has thrown up is the worst debt service–to-revenue ratio is the history of Nigeria. It grew from less than 45% in 2015 to 70% in 2019. It is unexpectedly that is endangering the country’s economy as it makes it extremely difficult for government to continue to borrow more without having to hike the policy rates, which will further increase inflation and further drives policy rate higher and higher. And in an effort to blindly fight the same inflation, the MPC intervenes with billions of dollars from our foreign exchange reserves.
What makes the whole situation distressing is the fact that rather than government’s capital expenditure growing in relation to debt, it is recurrent spending that is growing the debt. Little wonder from N2.59 trillion in 2015 it has unbelievably jumped to N4.04 trillion in 2019. It is this geometric progression of recurrent spending that is increasingly endangering the country’s economy as it increasingly encounters difficulties in its debt service obligations.
Little wonder, with over 80% of government’s spending purely consumption, the country’s gross domestic product remains dangerously stuck at below 2%, when we are supposed to be growing at double digit rate in order to offset the current high population growth. Inflation rates remain difficult to be brought down notwithstanding the central bank spending over $15 billion in its efforts to artificially strengthen the naira. This subsidising of forex has further made the country import dependent as imports are made cheaper. Putting local producers out of business as a result has led to job exports and poverty imports in exchange.
Without stopping Buhari from continuing with this senseless dismemberment of the country’s economy, latest by December 2020 the economy becomes a candidate for bankruptcy. This happens when Nigeria’s debt service–to-revenue ratio becomes more than the country’s actual revenue. In other words, by 2020 the cost of debt service hits 105%. This is point at which Nigeria will borrow to add to its revenue in order to be able to meeting its debt obligations.
Certainly, those benefiting from this arrangement have continued to use public media to hide this looming bankruptcy from the Nigerian people. While they are rightly telling us that our debt profile is not dangerously high, what they don’t want Nigerians to know that because we borrow at cutthroats rates and for consumption rather than for investment, we are getting to the bankruptcy point at a point no lender will be willing to lend to the country even if we raise the policy rates to as high as 30%.
They don’t Nigerians to know that also at this point, our lenders can easily ad freely resort to demanding that government hands them the country’s strategic oil reserves and other important national assets.
And should government refuse, then, they can go ahead to confiscate our offshore assets, including confiscating oil cargoes once they have left the shores of our country.
We all know that if this happens, it is all over for Nigeria. It is over for the country because at this point all our crude oil importers will avoid buying our oil, while the cost of insuring oil cargoes will skyrocket.
Also at this point the country will be left zero foreign reserves since creditors could be given the right to take over such foreign exchange accounts.
That rather than controlling the skyrocketing recurrent spending, this government is so care less about it that it hardly makes efforts to prioritise capital expenditures by growing the country revenues.
The good news is that Atiku has promised to set in motion policies that will stop government from continuing with the expensive domestic borrowing. Instead his government will replace domestic borrowing with cheap and concessionary external loans.
Besides, unlike domestic loans, external loans have longer maturing period. Neither do they crowd out the real sector from the debt markets, nor is government social spending.
Atiku’s pro-external debt policy remains the best option especially because the country still has a lot of room for foreign borrowing. This is because our current external debt to GDP ratio is the lowest among peer economies such as South Africa, Mexico, Turkey, etc.
That explains why our most economically rational approach should be to grow our current external debt ratio. Understandably, making this shift has been resisted by top government policymakers who in connivance with our domestic lenders, mostly our commercial banks, have preferred to load government with expensive and difficult to service domestic loans.
Besides replacing domestic loans with external loans, one of best debt repayment options for government to pursue is the buy-back of government’s debts, using quantitative easing. Cheap external loans could be used in repaying extensive domestic loans.
Also reducing policy rates to a single digit will drastically reduce the present cost of domestic debt repayment. But for this to happen should appoint a non-banker as the next central bank governor, especially a reform-minded economist who should waste no time in separating monetary policy from banking regulation and supervision by spinning off Nigerian Banking Regulatory Commission from the Central Bank of Nigeria.
Tradermoni: The biggest fraud in our democracy
Osinbajo be ready because we have all the information on how you illegally withdrew billions of naira from Bank of Industry, and how without appropriation you illegally shared for vote buying.
In the meantime, you kept a bulk of the illegally withdrawn so-called tradermoni naira to yourself, cronies and godfathers.
Also, be ready because Atiku will send an army of forensic auditors to BoI, the CBN, the NNPC, the FIRS, etc. to fully ascertain the relationship they had with your office during the four years, especially regarding the tradermoni.
So, our fraudulent so-called pastor get ready because you will be in courts soon to explain to the world what happened to billions of naira you fraudulently spearheaded in the false name of tradermoni.
You must be made to fully account for every kobo of the tradermoni and who authorized it.