President Muhammadu Buhari has asked the Senate to consider and approve an external borrowing plan worth about N2.5 trillion to fund projects covered by the 2018-2021 borrowing projections, citing concerns about debt overhang. The country’s documented national debts will balloon to over N35 trillion if the bill is approved.
During plenary yesterday in Abuja, Senate President Ahmad Lawan read the letter dated August 24, 2021.
The projects listed in the 2018-2021 Federal Government Borrowing Plan will be financed through sovereign loans from the World Bank, the French Development Agency (AFD), the Export-Import Bank of China, the International Fund for Agricultural Development (IFAD), Credit Suisse Group, and Standard Chartered/China Export and Credit Bank, according to Buhari’s letter (SINOSURE).
The total amount is $4.05 billion, €710 million, and a $125 million grant component. The funds would be used to fund federal and state government projects in key sectors like infrastructure, health, agriculture, and food security, energy, education, and human capital development, as well as the COVID-19 response initiative, according to the President.
Despite mounting debt, official documents reviewed by The Guardian indicate that the Federal Government is pursuing a longer-term debt program that will extend the maturity of currently secured loans to between 10 and 30 years.
According to official documents, refinancing short-term loans has become an important part of the current national debt management strategy.
While there is no official data on the percentage of matured debts that are being refinanced, Godwin Owoh, a professor of applied economics and debt management consultant, estimates that it is around 85%.
In its 2019 Annual Report and Statement of Accounts, the Debt Management Office (DMO) admitted that refinancing short-term loans with longer-term loans aligns with the 2016 – 2019 Medium-Term Debt Management Strategy and that its achievement in that context is a major improvement on the debt management approach.
The strategy of borrowing long, and restructuring of the domestic debt portfolio by refinancing matured treasury bills with longer tenor securities lengthened the Federal Government bond yield curve up to 30 years within the period and was critical to the successes recorded,” DMO said in the appraisal.
The DMO’s top priority is to keep the overall public debt portfolio’s average time-to-maturity (ATM) below ten years.
Long-term loans are generally advised for growing businesses that want to plan and grow steadily. Experts, on the other hand, are concerned that deferring the maturity dates of Nigerian debts is akin to delaying the fabled “doomsday.”
This comes after it was revealed on Monday that between 2015 and 2020, the Federal Government spent N11.679 trillion on debt servicing and N8.31 trillion on capital and development expenditure.
In 2015 and 2016, N953.620 billion and N1.475 trillion were spent on debt service, respectively, while N1.841 trillion and N2.203 trillion were paid on the same line item in 2017 and 2018, respectively.
The findings were revealed in the Centre for Social Justice’s “Analysis of the 2022-2024 Medium Term Expenditure Framework and Fiscal Strategy Paper,” which was presented in Abuja (CSJ).
In 2019 and 2020, debt service totaled N2.254 trillion and N2.951 trillion, respectively. The five-year debt service profile (2015-2020) totaled N11.679,845,205, 997, translating to a yearly average of N1.386 trillion.
Eze Onyekpere, the Lead Director of CSJ, who has been at the forefront of the campaign for fiscal discipline and transparency in government affairs, stated at the presentation that Nigeria’s debt has been increasing in double digits year after year since 2015, with the highest increase recorded between 2015 and 2016.
Onyekpere cited DMO statistics to say that the public debt stock was N12,603 trillion in 2015, N17.360 trillion in 2016, and N21.725 trillion in 2017. Public debt was N24.387 trillion, N27.401 trillion, and N32.915 trillion in 2018, 2019, and 2020, respectively.