For the next president of Nigeria, one of the key decisions he must be certain about is what to do with Nigeria’s massive debt and debt service, both local and foreign.
This is one decision that Nigerians should extract from the presidential candidates as the election draws nearer and debates – or campaigns – are getting hotter. What we do with debts in the coming dispensation will define a lot of things about the economy. We must handle debts the right way before they derail the economy.
Each of the men seeking to occupy the coveted seat of power should, ahead of the crucial election slated on February 25, tell Nigerians in clear, unambiguous terms, what they will do with the country’s current debts and, going forward, what his administration will do about borrowing.
Debts are good because of the leverage they give to the borrower. With a debt, a borrower is enabled to undertake projects on a scale far above his ability. That is leverage. But the downside of debts is that they take resources away from the borrower when repayment time arrives. So what happens between the time of borrowing and the time of repayment is crucial.
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The Debt Management Office put Nigeria’s public debt by the end of June last year at N44.6 trillion, which was further broken down to N17.5 trillion as external debt, and N26.92 trillion as domestic debt. But we do know that this figure has changed significantly since then, with the government’s indebtedness to the CBN alone standing at over N22 trillion.
With a forecast of economic recession and slow growth looming this year, it will be a double jeopardy to combine that with the weight of debt that will be taking away critical resources from the treasury. While the IMF has forecast a GDP growth rate of 2.7 per cent for Nigeria this year, there is so much uncertainty hanging over the world economy that the local economy could actually experience a decline. The possibility of this becoming a reality should trigger proactive measures now in preparation for that. That means in effect that the debt burden can no longer be treated with levity.
If this economy should experience a downturn, there may be an inclination by the government to default by delaying payments of either interest or principal, or even both. We must, therefore, get the templates right now for dealing with these possibilities as they emerge this year.
Because these debts are fixed contractual obligations, there may not be any easy way out for Nigeria should the above scenarios play out.
Restructuring has its costs, as we are beginning to understand in light of the ongoing crisis in Ghana. In fact, since last month Ghana suspended interest payments on most of its foreign debts, and the question that’s on the lips of many people now is: who in Africa will be next to default? Obviously, nobody wants to be the next bad example out of Africa, but the best way to avoid that is to do the right things early enough. And there is a wide range of possible actions that a country can possibly take to address its indebtedness.
Atiku Abubakar has disclosed what he will do with our debts if elected president.
The presidential candidate of the People’s Democratic Party (PDP), says he would engage creditors to seek “cancellation or forgiveness” to address the country’s foreign debt profile.
“If you are talking about foreign debt, we have done it before, I will engage our creditors and ask for debt forgiveness or cancellation like we did before. Coming to local debt, if we stabilise the economy, we will borrow less, and propose a flexible payment plan,” he was said to have declared publicly.
Atiku is obviously basking in the glory of the $12 billion debt cancellation achieved by the Obasanjo administration in which he served as vice president.
Nigerians also would want to know the stand of the other candidates. After all, although one person will be president, the others will be in opposition, offering their views as the opposition. So, they must have a voice on this.
Where do the other contestants stand on the debt crisis? This is no longer an issue that can be ignored. It should form an integral part of the economic policy of the next government, as it will feature prominently in the trajectory of the economy subsequently.
What is the position of the presidential candidate of the ruling All Progressives Congress, Asiwaju Bola Ahmed Tinubu? What is Labour Party’s Peter Obi’s plan, and how does Kwakwanso of the NNPP plan to tackle the debt albatross hanging over our dear nation? BAT is offering Nigerians a new lease of life, a promise of renewed hope. So, how will the debt policy of his administration differ from what the current administration has done with the nation’s debt level?
The point is, whoever forms the next government must know from the word go that Nigerians will hold him responsible for its fiscal activities. A situation where debt volume balloons out of sync with the realities of the economy will no longer be acceptable. This is what the present administration has done with the nation’s debt. Tied to that also, should be the borrowing programme of the government. Nigeria now needs a policy on borrowing, whether from commercial lenders or multilateral sources.
Some people have likened Atiku’s option to being equivalent to going the way of Ghana. While this is not quite the same, in the sense that Ghana defaulted by saying it cannot pay interest, it is not quite clear now how the debt forgiveness option he is pushing will perform.
Between now and February 25, this debt question must be answered. Where do the candidates stand on our debts?
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