External Borrowing: PGF D-G calls for public enlightenment
Aanya Igomu, Abuja
The Director-General of the Progressives Governors Forum, PGF, Mr Salihu Lukman, has called on Nigeria’s Ministry of Finance, Budget and National Planning to educate the public on the government’s decision to borrow externally to finance the 2021 National Budget deficit.
Mr Lukman, who made the appeal in a press statement also urged the Central Bank of Nigeria, CBN, to urgently stabilise the Naira exchange rate.
He said two major reasons that give leaders of the opposition Peoples Democratic Party, PDP, the confidence to challenge decisions of the All-Progressives Congress, APC government is due to the relaxed attitude of some government appointees.
“One of the issues that need to also be appreciated is that to some extent, the confidence of PDP leaders tends to be high in engaging debates around the performance of the economy because of the laid-back attitude of some appointees of Federal Government who should have been very proactive in directing public debates in the country.
“Many PDP leaders and their supporters are emboldened by the weak responses of designated public officers in Federal Government saddled with the responsibilities of engaging Nigerians around initiatives of the government.
“The other challenge, which is very disturbing is issues around the management of Nigeria’s foreign exchange by the Central Bank.
“Had the Naira to US Dollar exchange rate been stable in the last two years, most of the alleged debates about so-called recklessness against the government of President Buhari would have been long settled?” he said.
Mr Lukman while defending the decision of President Muhammadu Buhari’s government to borrow some more money said Nigeria’s debt rate is sustainable due to the country’s Debt/revenue ratio.
He further gave an analysis of Nigeria’s Debt/GDP ratio under the APC government led by President Buhari since 2015 compared to the previous governments of the opposition PDP from 2009 to May 2015.
“So far, the debate about Nigeria’s debt is based on the absolute value of the amount Nigeria owe. Variables of both GDP and revenue are ignored in the debate.
“During the administration of former President Olusegun Obasanjo’s (1999 – 2007), external debt was reduced to $2.11 billion at the end of 2007. However, the domestic component increased from N798 billion to N2.17 trillion within the same period.
“According to the Debt Management Office (DMO), the breakdown of Nigeria’s debt stock shows that $20.5 billion (about 73%) was owed to Paris Club. By 2004, the external debt stock had risen to $35.94 billion.
“The negotiation eventually paid off in 2005 when Paris Club granted relief of $18 billion. By the end of 2006, the Obasanjo administration had cleared off the Paris Club’s debt. However, the country still owed $2.11 billion external debt and domestic debt was or N2.17 trillion.
“Under late President Umaru Musa Yar’adua (2007 – 2011), Nigeria’s external debt increased from $2.11 billion to $3.5 billion and domestic debt rose to N5.62 trillion.
“Similarly, between 2010 – 2015, during the tenure of former President Goodluck Jonathan, Nigeria’s foreign debt rose to $7.3 billion and domestic debt was N7.9 trillion. By June 2021, under President Buhari’s administration, Nigeria’s external debt has risen to $28.57 billion and domestic debt was N16.02 trillion.
“Computed at current basic prices, under former President Obasanjo, between 1999 and 2007, Nigeria’s GDP increased from N5,426.47 billion to N34,318.67. By 2010, under late President Yar’Adua, Nigeria’s GDP increased to N62,989.40 billion.
“In 2015, under former President Goodluck Jonathan, increased to N94,144.96 billion. At the end of 2020, under the current administration of President Buhari, Nigeria’s GDP has increased to N152,324.07.
“Just looking at both the debt profiles of respective governments since 1999 as well as GDP values, debt/GDP ratio has decreased from about 22% in 1999 to about 12% at the end of former President Jonathan’s administration.
“By the end of 2020, under President Buhari, debt to GDP ratio has gone up to around 21%, but still less than the 22% in 1999.
“Low debt to GDP ratio indicates that the economy produces and sells goods sufficient to pay back the debt. Therefore, based on Nigeria’s debt to GDP figures, arguments of the previous PDP administration performing better than the current Buhari administration may appear attractive.
“The point however should be emphasised that although some literature suggests that debt to GDP ratio of below 60% is sustainable, the issue of assessment of the performance of governments revenue in relation to debt provides a better measure of sustainability.
“In other words, what is the size of the debt in relation to revenue, which is the point made by Richard Salsman to the effect that ‘public debt/GDP metric is better than none but the public debt/revenue ratio better measures fiscal sustainability.
“Nigeria’s total revenue in 1999 was N949.2 billion. In 2007, under late President Yar’Adua, it rose to N5,727.5 billion, in 2010, N7,303.7 billion, and in 2015, under former President Goodluck, N6,912.5 billion and in 2020, under President Buhari, N9,303.2 billion. This means that debt to revenue ratio was respectively 3.6%, 1.3%, 1.75% and 1.75%,” Lukman said.
The PGF DG concluded that following the above analysis, the ability of Nigeria to pay back its debts under President Buhari is not lower than it was under any PDP President.