Rising Nigeria Debt Profile: ANEEJ, FG, Others Meet To Free The Nation Off The Hook

Africa Network for Environment and Economic Justice, ANEEJ yesterday organized a one day collaborative meeting with representatives of federal government and other partners to find ways to freeing Nigeria from the rising current debt trap.

Address at the experts collaborative meeting is presented excerpts:

Welcome Address by ANEEJ Executive Director, Rev David Ugolor, profoundly represented by the Deputy Executive Director, Comrade Leo Atakpu, at the One-day Nigeria Debt Management Advocacy Meeting in Abuja.

An Address by the Executive Director Of Africa Network For Environment And Economic Justice (ANEEJ), Rev David Ugolor At a Debt Advocacy Meeting Organised in Collaboration With Africa Forum And Network On Debt And Development (AFRODAD), Zimbabwe held at the Reiz Continental Hotel, Abuja, 30 November 2020

The Honourable Minister of Budget and National Planning, Mr Clem Agba,

Chairman, Senate Committee on Local and Foreign Debt,

Director General, Debt Management Office (DMO)

The Executive Director, AFRODA, Harare, Zimbabwe,

Heads of Various Civil Society Organisations here present,

Gentlemen of the press,

Distinguished Ladies and gentlemen.

It gives me great honour and pleasure to welcome you all to this bilateral meeting which seeks to interrogate the rising debt profile of Nigeria and strategies for its management within the context of Covid-19.

It is no longer news that the corona virus, otherwise known as COVID 19 has joined the list of deadly diseases ever known to man with devastating consequences in all strata and sectors of global society and economies in the wake of its outbreak.

The Covid-19 pandemic presents the world with a challenge that is unparalleled in human history.

While advanced economies are being hit exceptionally hard by the broadest collapse of the global economy since 1870, they have substantive capacities to respond and protect lives and livelihoods.

In developing countries the crisis could push over 500 million people into extreme poverty while half of the global workforce stands in immediate danger of having their livelihoods destroyed.

The impacts of these developments will be hardest felt by the most vulnerable in society, particularly women, girls and Persons With Disabilities.

Development plans in many countries in Sub-Saharan Africa (SSA) lie in difficult straits due to low domestic resource mobilization and rising debt commitments which suck up scarce resources otherwise meant for investing in development in the region.

Sub-Saharan Africa’s external debt stock rose from $293 billion in 2010 to $644 billion in 2018.

Its debt service as a ratio of exports rose from 15% in 2010 to 28% in 2018.

Recent IMF ratings show that about 7 countries in Sub Saharan Africa are already in a state of debt distress and 28 faced with high to moderate risks of falling into this trap.

The average public debt was at 57% of Gross Domestic Product (GDP) as at the end of 2018.

This increase is debt has been partly accounted for by African governments tapping into international private debt markets, taking advantage of their improved credit ratings and low global interest rates.

SSA governments have also expanded domestic borrowing.

Africa’s debt challenge has been heightened due to the outbreak of Covid-19 and the attendant sharp decline in commodity prices which have led to economic contraction in the region.

Sub-Saharan Africa was already sliding into debt crisis before the outbreak of COVID-19, with many governments already carrying large balance of payment deficits.

Governments were reported to be spending up to 45% of government revenue on external debt service.

This raise concerns on the debt sustainability outlook of Sub Saharan Africa and their ability to meet the financing requirements for the sustainable development goals (SDGs) and the African Union’s Agenda 2063.

It is likely that, because of the economic effects of the covid-19 pandemic, Africa will enter a recession that can stall development process and reverse economic gains of the past decades.

This will impact hugely on the region’s debt servicing capacity and push the region towards a major debt crisis.

While it is justifiable that a developing country like Nigeria will pursue its development goals by seeking resources to fill capital gaps for the benefit of her citizens, the rate at which it has gone from a less indebted country immediately after the Paris Club debt forgiveness of 2005 is amazing.

This is because, as recent as 2007— in the final year of President Olusegun Obasanjo —- Nigeria had just N0.5tn deficit, about 2.9% of the country’s Gross Domestic Product.

As at the first half of 2019, the Federal Government’s deficit has escalated to 24.39tn which is close to 20% of her GDP.This problem of debt remains one of the major economic policy issues confronting developing economies like Nigeria.

Figures from the Nigeria Debt Office shows that the country’s public debt as at June 30, 2020 stood at slightly over 31 trillion Naira.

This represents about 17.11 percent increase from the figures a year earlier which stood at 25.7 trillion Naira.

Under current baseline analyses, Nigeria’s public debts are expected to remain in an upward trend for the next five years – reaching up to 37.4 percent of the country’s GDP in 2022 before dropping slightly to 36.3 percent in 2025.

This will tighten the public service expenditure on the provision of essential services and infrastructural investments as debt service payments are expected to continue to absorb a large share of federal government revenues over the medium term under current policies.

Reports show that about N921.9 billion was put into domestic debt service between January and June 2020, while N288.6 billion was used on foreign debts; making a total of N1.21 trillion.

This is about 12.3 percent increase from the N1.06 trillion committed during the same period of 2019 to debt servicing.

We have more experts in the room and I am sure we will hear more on these numbers later.

But more importantly, we would like to know from our panelists and of course everyone in the room, what strategies can government, Civil Society, media and other stakeholders adopt to get Nigeria out of the debt trap and provide more resources to finance the nation’s much needed development plans.

I thank you.