At the recent 76th session of the United Nations General Assembly (UNGA) in New York, United States (US), President Muhammadu Buhari called for debt relief for Nigeria and other countries in development. The president’s intervention is based on the fact that the COVID-19 pandemic has worsened the economic situation in poor countries. Developing countries are grappling with an unsustainable debt burden, Buhari says, even as the pandemic has increased the risk of debt distress, while critical public financial resources are now allocated to external debt servicing and debt repayments. detriment of national challenges such as health, education and other critical development needs. In the President’s mind, debt relief is the best way to enable these countries to restructure their economies.
Based on this premise, we are of the view that Nigeria and other indebted developing countries should be considered for debt relief in accordance with President Buhari’s call. However, these countries need to think of other ways to reorganize their economies and therefore should not rely too much on debt relief or other palliatives from developed countries. Nigeria is currently heading dangerously towards defaulting on its creditors. The latest figures released by the Debt Management Bureau (DMO) showed that in the first half of 2021 Nigeria spent 1.47 trillion naira on debt service. While there is nothing wrong with asking for debt relief, we advise the President to reduce the administration’s penchant for borrowing. There are other creative ways to revamp the economy instead of borrowing unrestrictedly. The government should end illegal gold mining in parts of the country and come up with effective guidelines for solid mineral mining. The colossal amount lost each year to illegal mining, estimated at billions of dollars, can be used to jumpstart the economy. The administration’s relentless borrowing will weaken its demand for debt relief from Nigeria. While debt relief is desirable, it is important to stress that the lack of transparency and poor application of loans are some of the reasons why many developing countries, including Nigeria, are in dire straits. the debt. This should not be the case if the right policies are in place and the loans are deployed for profitable projects.
We believe that Nigeria can end the borrowing frenzy and reduce its debt burden to a manageable level by putting in place good economic policies rather than asking for debt relief. Currently, Nigeria’s debt service-to-revenue ratio is 98%. This makes Nigeria’s borrowing unsustainable. Experts have predicted that things are likely to get worse with Buhari’s latest request to the National Assembly for another N2.5 billion loan. The new loan, the president explained, would be used to finance projects under the 2018-2021 borrowing plan through sovereign loans from the World Bank and other external financial institutions. If the loan is approved, Nigeria’s outstanding debt will reach over 35 trillion naira. In addition, around 85% of loans already due are rescheduled. In May, President Buhari secured a $ 6.18 billion loan to finance this year’s 5.6 trillion naira budget deficit. Additionally, in July, the Federal Executive Council (FEC) approved the 2022-2024 Medium-Term Expenditure Framework and Budget Strategy Paper, authorizing the financing of the 5.6 trillion naira deficit forecast in the 2022 budget by loans. With the decline in oil revenues, the government’s recourse to excessive borrowing is not sustainable. Nigerians fear the government will end up mortgaging the country’s future if the borrowing frenzy is not curbed immediately. The government should end overreliance on oil revenues and aggressively diversify the economy. Dependence on crude oil, to the detriment of non-oil exports, has made the economy vulnerable. Disturbingly, under the current administration, Nigeria’s public debt has swelled so high, from N18.88 trillion in June 2015 to N33.110 billion in March 2021. This represents an increase of approximately 296% in six years. Nigeria has so far borrowed as much as $ 31.98 billion from the World Bank Group and other financial institutions. That the nation’s tax base be increased enough that the government can make a lot of money through proper taxation. Many countries are managed by an effective and efficient tax administration. Nigeria can borrow a sheet from those countries which have an efficient tax system.