It’s noteworthy that a total sum of N17.126 trillion was passed by the Senators as Nigeria’s 2022 budget, as against the N16.391 trillion tendered to the joint session of the National Assembly (NASS) by President Mohammadu Buhari.
The 2022 budget has it that the projects to be executed in Nigeria within the ongoing fiscal year would be financed by the foreseen assistance of both local and international loans yet to be sought, having estimated the expected oil benchmark for the year among other sources of financing.
It’s pertinent to acknowledge that governments in rich as well as poor nations borrow money from such domestic and international markets as the World Bank, the International Monetary Fund (IMF), and commercial banks.
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In rich nations, government borrowing obviously stimulates the private economy. It creates jobs and raises incomes of the majority of the population of the affected nation, thereby improving their standard of living. However, in poor or developing nations, government borrowing does not generally produce the same results or the required effect.
In Nigeria, for instance, for decades now, the government incessantly enjoys domestic and international borrowing but pathetically, such a gesture hasn’t stimulated the private economy as anticipated. To say the least, the role of Foreign Direct Investment (FDI) in the country’s economy has not been significant.
Between 2009 and 2015 alone, the government engaged tremendously in international borrowing. This gesture was reflected in the country’s balance of payments deficits.
In spite of the enormous borrowing by the government, grants received out of benevolence, and funds coming from plea bargaining, as well as debts rescheduled or forgiven, the nominal income per capita hasn’t shown any significant improvement.
The country average income per capita on a monthly basis for the recent years was about USD130 dollars or thereabouts which was far below the $500 average income for the poorest African countries. Pitiably, the country cannot presently boast of up to USD80 dollars as its monthly average income per capita.
Nigeria has recently faced an unprecedented population growth. Although the population is increasing at an alarming pace, its purchasing power is not.
Such a phenomenon as posited above has two cogent and inevitable effects on the economy. The first is that the rapid increase in population impoverishes the country as a whole, hence making the accumulation of capital very difficult. Secondly, the low purchasing power limits the internal market.
The major economic plight in a country like Nigeria remains that the government has not been accountable to the people. Thus, it can borrow as it pleases, and the unsuspecting electorate would still foot the bills.
We must acknowledge that the government will continue to borrow as long as there are interested lenders, provided the fiscal policies of the country remain docile. This is why suchlike policies are seriously yearning for restructuring.
Besides, there’s enormous politics involved in international lending. Though Nigeria can invariably find her way as regards assessing loans from either official or unofficial sources via the use of her international connections or immunity, for how long will she continue to depend on external borrowing? This, among other paramount questions, is required to be raised by any one or analyst who truly thinks good of the country.
It would be recalled that during 1966-1974, or thereabouts, developing nations were growing at a high rate simply because they were yet to be involved in external borrowing or importation of goods and services. In view of this, their annual average growth rate stood at 7%.
But in order to meet their subsequent population growth needs, many of them began to import heavily, particularly capital goods, oil and foods. Funnily enough, they are mostly involved in export-oriented strategy as it’s presently witnessed in Nigeria in the oil sector.
It’s not anymore news that the borrowing, especially external, that’s captured in the Nigeria’s 2022 budget, which is not unusual in the country’s budgeting pattern, has been generating a lot of ripples and mixed feelings in various quarters, thereby making several Nigerian analysts as well as social commentators to be involved in series of fallacious arguments.
It’s amusing and perhaps very awful to realize that sometimes most Nigerians play politics with issues of national interest, particularly very sensitive economic matters. This kind of lifestyle has conspicuously caused the country more harm than good.
We are not unaware that borrowing is necessary, but it ought not to be seen or adopted as a measure that must be taken for a country to survive or grow. Hence, such a mindset needs to be jettisoned headlong.
It’s worth noting that such an economic approach as borrowing becomes consequential only in certain circumstances, and not in all as being presumed in various quarters.
Even as an individual, if you dare take borrowing as a tradition or norm, you will surely live to regret it. We, either as individuals or groups, need to borrow sometimes but not always.
Of course, many are of the view that provided you are borrowing for a tangible project, it’s a welcome development. No doubt, borrowing becomes paramount and necessary only when the prospective borrower intends to use it for feasible projects such as capital expenditure.
Ab initio, Nigeria was borrowing for tangible reasons. But as a result of corruption, rather than doing the needful or investing the borrowed funds meaningfully, she invariably ends up doing otherwise.
So, if Nigeria as a people failed to address such a lapse, the nauseous phenomenon would continue to repeat itself, thereby making the country indulge in borrowing perpetually.
On a yearly basis, Nigeria’s international debt increases colossally, thus negatively affecting her current account balance which is expected to rise steadily. This is indeed an aberration, to assert the least.
Survey indicates that the external debt in Nigeria averaged USD6.38 billion from 2008 till 2015 when it reached an all-time high of USD56.74 billion in the fourth or last quarter of the said fiscal year which was about 10.9% of her GDP for that very year, though it recorded a low of about USD3.63 billion in the first quarter of 2009.
Furthermore, Nigeria’s total public debt stock stood at N33.107 trillion or USD87.239 billion, as at the end of the first quarter of 2021, and the same debt profile lingers till date. Worse still, a large portion of these debts are owed to private lenders at variable interest rates.
Rather than being preoccupied with how to repay the backlog of debts, the government keeps borrowing at the expense of the country’s economy. This implies that Nigeria has hitherto apparently absorbed incessant borrowing as a tradition.
Having acknowledged that it isn’t a wholesome belief or practice, there’s a compelling need to put up stiff measures towards addressing the monumental anomaly.
Against this backdrop, let’s briefly take a tour to the history book. The IMF then imposed its Structural Adjustment Programme (SAP) conditionality on the deficit countries, which Nigeria was inclusive, to force them to take necessary steps toward reducing their payments deficits and consequently earn sufficient foreign exchange to enable them to pay back their loans.
Hence, they had to devalue their official exchange rates, abolish or liberalize foreign exchange controls, introduce anti-inflationary programmes as well as adopt a free trade policy.
Notwithstanding, the ‘almighty’ SAP didn’t produce any successful result; rather, it ended up constituting more problems, perhaps still due to corruption. Now, the question is: how can Nigeria escape from this lingering debt trap as well as desist from her unending borrowing tradition?
The country needs to embark on an economic lobotomy. The apex government is expected to, without much ado, shift course from an internationally-dependent growth to domestically-based economic development plan. This can only work if the country’s financial and monetary policies are revisited and reviewed.
To this end, the concerned authorities have to strengthen most of the country’s fiscal policies, participate in frugal expenditure, initiate deflationary economic measures, revive moribund economically-oriented projects, detest construction of white-elephant projects; and most importantly, tackle the unbridled corruption as well as security challenges with the last drop of their blood.
We must understand that growth can be self-generated by focusing on products commonly consumed by low-income citizens. Even a little improvement in the productivity and income in such a quarter will capture a sizable market and assist in sustaining development of other products and markets.
Therefore, instead of embarking on massive infrastructural projects, the government ought to start with improving such capital-oriented projects that make production cost-effective as road cum railway network, power cum water supply, and refineries.
So, acknowledging that borrowing is only regarded as a healthy practice when the borrowed funds are utilized judiciously and selflessly, it’s needless to reiterate that the governments at all levels must invest meaningfully and wisely to reap heavily and successfully.