As President-elect Bola Tinubu takes over the mantle of leadership Monday (today), Blueprint gathered he would have a huge debt overhang staring him in the face with the hefty yoke of over $103.11billion (N46.25trn) debt left behind by the President Muhammadu Buhari-led administration.
Unlike Buhari who inherited a debt of approximately $10.32 billion in 2015, Tinubu will also contend with another N22.7 trillion Ways and Means Advances from the Central Bank of Nigeria (CBN).
Negative impacts
Indeed, the current total debts put at about N77 trillion has negatively impacted the nation’s economy, pushing majority of citizens into abject poverty, unemployment and poor standard of living.
The National Bureau of Statistics (NBS) reports that 63 per cent of persons living within Nigeria (133 million people) are multidimensionally poor.
Also, the Nigeria Economic Summit Group (NESG) projected that Nigeria’s unemployment rate would increase to 37 percent while the poverty headcount would increase to 45 percent in 2023.
There is also a very controversial $800 million loan recently obtained from the World Bank. It’s to be used as palliatives ahead of the now-suspended fuel subsidy removal.
DMO’s data
Data from the Debt Management Office (DMO) shows that Nigeria’s indebtedness to China has grown by 209 per cent in the last eight years, just as the DMO confirmed that the country’s total borrowing from the Asian giant climbed from $1.39 billion to $4.29 billion between June 2015, a month after the Buhari administration took over, and December 2022.
Chinese loans account for 84.73 per cent of the country’s total loans, with the remaining 15.27 per cent coming from France, Japan, India, and Germany, according to the data from DMO.
Chinese loans
As of September 30, 2021, the DMO listed 15 projects funded with Chinese loans to include the Nigerian Railway Modernisation Project (Lagos–Ibadan section), Nigeria Supply of Rolling Stocks, and the Depot Equipment for the Abuja Light Rail Project.
It was these projects that a recent report noted that the country is defaulting in servicing her loans.
According to the report, Nigeria has failed to fully service its debt to China, which has accumulated to the tune of N110.31 billion in the last two years.
It further added that the China debt stock included the principal and repayment charges, even as it also puts the principal fee from January 2021 to December 2022 at N69, 009,417,500 ($153.85 million).
It said the interest charges amounted to N41, 311, 455,000 ($92.1 million).
As Nigerians behold a new president in Tinubu today, analysts and political watchers have opined that the new helmsman needs to hit the ground running in view of the huge challenges awaiting him.
With a N77 trillion debt overhang that has the potential to wipe out any gains that the country may derive from the sale of oil, they posit that the government must exhibit the political will to address the challenges.
Rescheduling Nigeria’s debts
For Managing Director/CEO, SD&D Management Limited, Gabriel Idakolo, the Tinubu administration should look at the possibility of rescheduling the country’s debt.
In an interview with one of our reporters, Idakolo said: “The Bola Tinubu government should critically assess the cost of servicing the N77 trillion debts and constitute a committee of experts with a view to looking at the best possible ways of approaching our creditors for negotiations as regards debt rescheduling, reductions or harmonisation.”
Idakolo further explained that to tackle poverty and tame inflation, “the new government must boost the economy with immediate support for SMEs to reduce unemployment and also embark on ingenious welfare programme across broad spectrum of Nigerians unlike the method used by the outgoing administration that targets a small percentage of the population for its welfare programmes.”
New president’s ability
Also in another interview with Blueprint, an Abuja-based Chartered Management Consultant, Prosper Ahworegba, expressed confidence in the new President’s ability to manage and turn the economy around.
Ahworegba, who is also a physician, said the government must develop a strategy to manage the debt, seek more Foreign Direct Investments (FDIs), and drastically cut down on the cost of governance.
“Asiwaju Bola Ahmed Tinubu is a former governor of Lagos state in Nigeria, and is currently Nigeria’s President – Elect who will be inaugurated on May 29, 2023. He is a man with the Midas touch, and having turned the fortunes of Lagos around positively, I have no grain of doubt that he will manage the Nigerian economy well.”
Debt accumulation/sustainable strategy
On debt accumulation, Ahworegba said: “To begin with, the government must understand the root causes of the debt overhang, including the factors that led to the accumulation of the debt. This information can provide a basis for developing a strategy to manage the debt, such as prioritizing debt repayment or restructuring.
“Additionally, it is crucial to explore all potential sources of revenue to address the debt overhang, such as changing the mono-product economy and seeking more direct foreign investment. The government should also consider cost-cutting measures to reduce expenditures and free up resources for debt repayment. As currently constituted, the federal government is a leviathan – it is too big. The government must consider fiscal decentralisation to be effective.
“Furthermore, the government must engage with creditors and other stakeholders to negotiate favorable terms for debt repayment or restructuring. This may involve seeking debt forgiveness or debt rescheduling or negotiating lower interest rates or longer repayment periods.
“The government needs to ensure that any strategy to address the debt overhang is sustainable over the long term, and does not compromise the country’s economic growth and development.”
While acknowledging the complex nature of dealing with the twin issues of inflation and poverty, the chartered management consultant said addressing poverty and inflation is a complex challenge that requires a multifaceted approach.
He said as president, Tinubu and his government can take a number of steps to turn the situation around and improve the lives of Nigerians.
Fiscal and monetary policies, others
To address the twin issues of inflation and poverty reduction, he said the government must seek to align monetary and fiscal policies, create jobs and provide social safety nets amongst others.
“Fiscal and monetary policies: The government can implement fiscal and monetary policies that stimulate economic growth, create jobs, and stabilize prices. This could include measures such as reducing taxes, increasing government’s spending on infrastructure, and working with the Central Bank of Nigeria to manage inflation.
“Creating jobs is key to reducing poverty and improving the standard of living for Nigerians. The government can focus on creating an enabling environment for businesses to thrive, encouraging entrepreneurship and small businesses through soft loans and investing in education and skills training. The ease of doing business must be enforced. SMEs are being choked out of existence.
“The government can provide social safety nets such as cash transfers, food subsidies, and healthcare programs to help the most vulnerable members of society. This can help alleviate the immediate effects of poverty and reduce the impact of inflation on low-income households.
“Agriculture is a major sector of the Nigerian economy and has the potential to create jobs, increase food production, and reduce poverty. The government should invest in agriculture by providing credit to farmers, improving infrastructure, and promoting agricultural research.
“Corruption is a major drain on the Nigerian economy and contributes to poverty and inflation. The government should take steps to reduce corruption by strengthening anti-corruption agencies, encouraging transparency and accountability, and promoting ethical behavior in public and private sectors.
“Overall, addressing poverty and inflation requires a sustained effort over time and a comprehensive approach that addresses the root causes of these challenges. Bola Ahmed Tinubu’s government can make a significant impact on the lives of Nigerians by implementing policies and programs that promote economic growth, create jobs, and reduce poverty,” Ahworegba said.
Identifying problematic spendings
Also in a chat with one of our correspondents, a political economist, Adefolarin Olamilekan, said the government must identify spending that plunged Nigeria into debt over the years.
He also said the fiscal authorities must be willing to reduce the cost of governance.
“We expect an approach that would factor in a synergetic policy. That would embark on completion of already debt incurred projects across the country.
“The administration must be bold to stop any further borrowing spray at all levels.
“Lastly, it must fine tune its expenses on fuel subsidies and usage of borrowing to cater for recurrent expenditures,” Adefolarin said.
Tackling poverty
He also told the Tinubu administration to break away from the previous style of tackling poverty.
“Tackling poverty by the Tinubu administration must be systematically done. The administration must look away from the cosmetic approach of the previous government that ended up giving handouts to Nigerians in the name of empowerment or supporting Small Businesses and Entrepreneurs.
“We believe the problem arising from our economy leading to inflation is the failure of the government to address the core problems. That includes power electricity, wrong timing and implementation of monetary and fiscal policy, talk of deplorable road network, insecurity, multiple taxation at the sub-national levels, not to mention the global economic impacts through international price transmission of goods and services because we are a nation of import dependent economy.
“This demands a bold economic policy to address inflation headlines. Majorly, food inflation is foremost on the table. And it is expected that his government must be serious in tackling insecurity, and engage more with the sub-national government to end insecurity. Another is the clear case of price control, which the government of the past failed to bring on board. It is time for us to appreciate this mechanism in our national economic life.”