Nigeria’s debt crisis has assumed catastrophic proportions even as everyone in the federal government feigns ignorance. The federal government ended 2022 with a national debt profile of N44.6 trillion, a scant N400 billion short of pundits’ projection.
Ordinarily, a debt to gross domestic product (GDP) ratio of 40 per cent is nothing to worry about in well grounded economies. However, Nigeria has a seemingly irreversible precipitous revenue decline that worries everyone except the federal government.
The World Bank laments that “Nigeria is 115th out of 115 countries in terms of the average revenue to gross domestic product ratio.” With a World Bank debt of $11.7 billion, Nigeria is rated fifth on the World Bank debtors list.
The situation is so disastrous that earlier this year Mrs. Zainab Ahmed, Nigeria’s minister of finance warned that government spent 119 per cent of its dwindling revenue on debt service alone.
What could be deciphered from the doom’s day confession of the finance minister is that Nigeria borrows to service its mountain of debts. Government revenue is no longer enough to service debts. That probably explains why Nigeria has the highest number of out-of-school-children as 20 million children cannot find space in public schools.
Ironically, the federal government deviously consoles itself with the fact that Nigeria has one of the world’s lowest debts to GDP ratios. That is true. Nigeria’s debt to GDP ratio is deceptively low at about 40 per cent.
The United States of America (USA), the world’s largest economy has a national debt of $31 trillion. That amounts to 136 per cent of America’s GDP of $22.65 trillion. But even with an alarmingly high debt to GDP ratio, America’s debt is more sustainable than Nigeria’s.
For the year 2022, the U.S. government would service its $31 trillion debts with $1.2 trillion. That is just about 25 per cent of America’s revenue of $4.02 trillion. America will consequently service its mountain of debts with a paltry 25 per cent of its revenue, while Nigeria with seemingly insignificant debts to GDP ratio services its debt with 119 per cent of its revenue. Conversely, the U.S. government has 75 per cent of its revenue left for capital and recurrent expenditures after debt service. Nigeria has nothing.
Nigeria’s imploding debt burden is engendered by three key factors all of which are caused by the federal government. The first is the nation’s dwindling revenue which the federal government has failed to reverse.
Nigeria has one of the world’s lowest tax to GDP ratio. The tax revenue of Africa’s largest economy is a scant 6.5 per cent of its GDP. Nigeria’s tax collectors are grossly incompetent and despicably fraudulent.
What goes into the pockets of the tax collectors is higher than what is grudgingly dropped into government coffers.
Nigeria’s tax collectors have developed a balefully dubious strategy of colluding with corporate bodies to reduce their tax liabilities in exchange for jumbo bribes.
If a company has a tax liability of N500 million, the tax man reduces the liability to N150 million in exchange for a bribe of N50 million.
Other taxable organisations are allowed to plough all tax liabilities into their coffers in exchange for bribes to tax collectors.
The Federal Inland Revenue Service (FIRS) passively announced last year that the South African parent company of DSTV, a pay TV firm that enjoys virtual monopoly in Nigeria, has not paid tax since it landed Nigeria in 1996.
FIRS put the company’s tax arrears at a whopping N2.6 trillion. Newspapers wrote editorial comments on the horrendous discovery and demanded not only the prompt collection of the arrears but adequate punishment for directors of the company to serve as deterrent.
Within weeks the humungous tax fraud was swept under the carpet. No one knows what the FIRS made of the discovery at a time when the federal government was borrowing to service its debts.
Nigeria Customs Service (NCS) is even more dubious than those who collect direct taxes. Last year what trickled into federal government coffers in the name of customs duty revenue was a paltry N1.2 trillion in a country that should be raking in anything from N5 trillion. The NCS rolled out the drums to celebrate what its directors described as landmark revenue returns.
Yes, N1.2 trillion was land mark returns because the NCS is used to setting deceitfully low targets for itself while the federal government in its contemptible docility nods in ignorant satisfaction.
Avoidable leakages are the next factors behind Nigeria’s dwindling revenue and calamitous debt burden. The Nigerian National Petroleum Company Limited (NNPC) is the largest conduit when it comes to revenue leakages.
NNPC cannot claim not to know those stealing 500, 000 barrels of Nigeria’s crude oil daily.
NNPC is guilty of criminal negligence or outright collaboration in the construction of a nine-kilometre pipeline that crude oil thieves used for nine years to divert 250, 000 barrels of crude oil daily for sale to international criminals.
NNPC’s crime is even worse than that of crude oil thieves. The company tipples Nigeria’s daily petrol consumption and drains federal government revenue into private pockets.
Everyone knows that at a time when surging inflation has drained the pockets of motorists, Nigeria cannot consume 102 litres of petrol per day as NNPC claims.
The ostentatious lifestyle of government officials is another factor behind the crushing debt burden. Nigeria was not as poor as it is today when Olusegun Obasanjo as military dictator in 1977 imposed austerity measures and restricted government officials to the use of cars with engine capacity below 2.0 cc.
Obasanjo himself used a Peugeot 504 sedan as official car. Nigeria’s financial crisis today is worse than what Obasanjo experienced, but government officials defiantly ride on N50 million Land Cruiser Jeeps even as government gasps for financial breath.
The federal government knows how to wriggle out of its financial asphyxiation. The problem is that it lacks the political will power to do the right thing.