Nigeria’s rising debt profile: Fact checking Obasanjo’s claim versus FG response

News

The Federal Government has assured Nigerians that there is no cause for alarm over the country’s debt profile both domestic and external as being speculated by scaremongers. Former president Olusegun Obasanjo had claimed Nigeria’s external debts have grown to N24.947 trillion or $81.274 billion in the last four years. Obasanjo, last Friday in Lagos at the first edition of the Nigerian Story organized by the “Why I Am Alive” campaign warned Nigeria risks bankruptcy with its penchant for loans under the current administration and the amount used in servicing the loans.

But the Minister of Information and Culture, Alhadji Lai Mohammed yesterday in Lagos; while briefing newsmen on the major achievements of the Buhari administration for 2019 said there were gross misrepresentations in the figures being bandied by Baba the debt profile, adding that the country had not reached its debt ceiling of 25% in total public debt stock to Gross Domestic Product (GDP).

“Recently, there have been concerns in certain circles about the country’s growing debt, both domestic and external. In the process, there has been some misrepresentations and scare mongering. We therefore, believe it is important to put things in perspective, so our citizens will be well informed,” he said. According to the minister, it is not correct to say Nigeria’s external debt alone is $81.274 billion. “The public debt stock is actually a cumulative figure of borrowings by successive governments over many years. It is therefore, not appropriate to attribute the public debt stock to one administration.

“Nigeria’s total public debt stock in 2015 was 63.80 billion dollars comprising 10.31 billion dollars of external debt and 53.49 billion dollars domestic debt. By June 2019, the total debt stock was 83.883 billion dollars, made up of 27.163 billion dollars of external debt and 56.720 billion dollars domestic debt,” he clarified.

Mohammed said there was no cause for alarm because Nigeria had a debt ceiling of 25% in the total public debt stock to Gross Domestic Product (Debt/GDP), which it had operated within. He said the ratio for Dec. 31, 2018 and June 30, 2019 were 19.09% and 18.99% respectively. The minister said that the debt service to revenue ratio had been higher than desirable, hence the push by the government to diversify the economy and increase oil and non-oil revenues significantly.

According to him, the government is also widening the tax base to capture more tax-paying citizens. “In the face of massive infrastructure decay, no responsible government will sit by and do nothing. This administration’s borrowing, therefore, is aimed at revamping our infrastructure, including roads, bridges, railways, waterways and power to help unleash the potential of the nation’s economy. The loans for the education sector will contribute to the development of our human capital, while the loans for the agricultural sector will help the move to diversify the economy.”

Obasanjo sounded the alarm that Nigeria faces an impending bankruptcy, with the country’s external debt ballooning by 700% in four years. He raised the bankruptcy alarm recently at an event in Lagos tagged “The Nigerian Story “created by the chief executive of Eureka Productions, Caroline Moore.
The former President who was a keynote speaker at the event reportedly put Nigeria’s external debt at $81.2 billion (about N24.947 trillion) from 10.32 billion dollars in just four years. OBJ claimed Nigeria would need to commit half of its foreign earnings to servicing its current level of indebtedness.

Baba said he felt it was his “duty and responsibility as a citizen to enrich public discourse with insights and perspectives on topical national issues. In four short years by March 2019, our external debt grew to N24.947 trillion or $81.274 billion. To service this current level of indebtedness, we must commit at least 50% of our foreign earnings. Such a situation talks about an impending bankruptcy,” Obasanjo said. But the FG rejected that claim as not reflective of the true state of Nigeria’s external debt.

Separating Facts from Fiction
According to the Debt Management Office (DMO) latest report released in June 2019, Nigeria’s total debt stock is $83.883 billion, made up of $27.163 billion of external debt and $56.720 billion domestic debt. DMO reports on Nigeria’s debt every three months. Out of the $27.163 billion, $22.887 billion is owed by the Federal Government. The states and FCT are responsible for $4.274 billion. It is therefore not accurate to claim Nigeria’s external debt alone is $81.274 billion.

Secondly, on the debt history of the Buhari administration, DMO reports that at the end of March 2015 – two months before Buhari took office on 29 May – the country owed a total of N12 trillion. At the end of June 2015, this debt had risen slightly to N12.1 trillion. This was US$63.8 billion at the then official exchange rate of N196.95 to the dollar. By the end of June 2018, total public debt had almost doubled to N22.4 trillion. The DMO said the increase included a US$2.5 billion Eurobond issued by the government in February 2018. (A Eurobond is a loan given out in a currency that is different to the currency of the country where it is issued). This increased Nigeria’s total debt to US$73.2 billion, using the Central Bank of Nigeria (CBN) 2018 exchange rate of N305 to the dollar.

Thirdly, from 2015 when Buhari assumed office till date, the nation’s debt, which the DMO puts at $83 billion at the end of June, is in essence, about where it was in 2005-06; when Obasanjo was president of the country. As at December 2004, Nigeria’s debt was $36 billion which then president Obasanjo said was unsustainable. At that time, Nigeria was spending more on interest payments than it did on health care and education. Given this debt level, Nigeria could not achieve the Millennium Development Goals.

Hence, in October 2005, Nigeria and the Paris Club announced a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria’s debt stock by $30 billion. The deal was completed on April 21, 2006, when Nigeria made its final payment and its books were cleared of any Paris Club debt.
However, analysts are unanimous in their opinion that; to have squandered the debt servicing savings in just fourteen years, with no tangible economic progress to show for it is beyond disappointing.