By Omoh Gabriel
Nigeria leaders are at it again. This time as usual, it is a fight between the legislators and the executive arm of government over who gets what. The blueprint for government’s annual spending called the budget, is the means by which scarce resources are allocated. As at May, the federal budget is yet to be signed.
Reason: The budget has been padded by the legislators beyond what the nation’s resources can take. The option is to borrow. The legislators wants Nigeria to borrow more. In the last eight years, the Federal Government has been mortgaging the future of Nigerians through excessive domestic borrowing to fund the national budget. Close to 70 per cent of the country’s annual expenditure profile has been hinged on running the government– payment of salaries, allowances, travels, etc with little left for capital projects such as road rehabilitation, railways, power, education and other infrastructure need for economic development. This is why the nation cannot boast of 12 hours of regular power supply, this is why there are no good roads across the country, this is why hospitals are now mere consulting clinics, this is why the standard of education has fallen to its lowest ebb, this is why there is mass unemployment in the country. Yet, the executive and the legislators are engaged in how much goes to which arm for their own good. It is not about how many new roads will be constructed, no; it is not about how water will get to the rural areas, no; it not about how agriculture will take the center stage in the economy, no; it about how much constituency allowance will be paid, how much more each will get so that they will turn their eyes away from the executive in whatever they do. That is why the legislators have never been able to monitor the execution of the budget. That is why the budget was padded.
The government has been spending about 70 per cent of the nation’s resources to maintain the few of them that are in federal, state and local government services, leaving a meager amount for the generality of Nigerians. In the 2011 Appropriation Bill, of the N4.7 trillion proposed, N3.5 trillion is for payment of salaries, allowances, pensions and running the Federal Government, while only N1.2 trillion is for roads, power, rail, building of new schools etc. While these self-centered leaders will ensure that every kobo proposed in the recurrent expenditure is spent, only close to 50 per cent of the vote for infrastructure will at best be spent. They will go to any length to source the money to maintain themselves and their families. Their personal comfort is first and foremost, the welfare of the masses must wait.
It is this craze that leads the Federal Government into massive borrowing even at a time when oil prices are rising. But government keeps deceiving itself and the citizenry with the slogan that we have not reached our borrowing threshold. Debt, generally, is not bad, but borrowing to do what? As it seems, Nigeria is borrowing for consumption purposes. Not for any meaningful developmental projects. The stake and cost of borrowing is getting higher by the day. Domestic debt stock constitutes the bulk of the total public debt at $28 billion, accounting for about 86 per cent of the total while the remaining $4.5 billion is for external debt according to the 2010 figures.
The Federal Government in 2008 used a total of N238.753 billion to service its domestic debts. This rose to N281.540 billion in 2009. The figures for 2010 are still being collated. A breakdown of the debt service showed that N149.2 billion was paid as interest on FGN bond and N193.787 billion for the same in 2009. In 2008, the government paid N916.72 million as call premium on local contractors’ debts. Interest paid on treasury bills in 2008 amounted to N43.555 billion but dropped to N38.788 billion in 2009. Government in 2008 paid interest of N39.22 billion on treasury bonds and N38.711 billion for the same in 2009. Principal payment for treasury bonds was N5.670 billion in 2008 and N10.187 billion in 2009. Interest paid on Federal Government Development stocks in 2008 was N69.88 million as against the N65 million paid in 2009. Principal payment for the development stock in 2008 was N100 million.
As at 2009, the ratio of external debt service to total debt stock was 18.33 per cent as against domestic debt which was 81 per cent of debt service payment. In real terms, for every one naira the government spent on debt service, 18.33 kobo went out of the country while 81.67 kobo was used to pay local debt that fell due and the interest on such facilities.
There has been a steady rise in domestic debt stock from 2005 to date, except for 2008 when a marginal decrease was recorded. The domestic debt in 2005 was $11.83 billion, 2006 – $13.81 billion, 2007 – $18.58 billion, 2008 – $17.69 billion and $ 21.87 billion in 2009. The figures for the external debt stocks, however, show that $20.48 billion was recorded in 2005, $3.54 billion in 2006, $3.65 billion in 2007, $3.72 billion in 2008, while $3.95 billion was recorded as external debt in 2009.
A cursory look at Nigeria’s debt stock showed that while in 2005 the total debt stock was $32.306 billion, it dropped to $17.349 billion in 2006, $22.229 billion in 2007, $21.398 billion in 2008 and $25.817 billion in 2009. The rate at which domestic debt is rising will hurt the nation’s economy if not arrested. Nigeria may get to the point where nearly all the revenues generated are used to service debt that are not for any specific developmental project but to finance the recurrent aspect of the budget to keep those in government in comfort. Nigeria has accumulated up to $28 billion equivalent in domestic debt. This is debt it is taking within the country. This is what President Jonathan needs to focus on. He has to pay attention to domestic debt and stop accumulating more.
This government thinks because the debt is domestic, it cannot harm the economy, this is not true, by accumulating lots of domestic debt, the government has clouded out the private sector. President Goodluck Jonathan must not accumulate any more domestic debt because it is going to lead to the same ills Nigeria came out from. It is not only external debt that leads to choking off of economic growth and clouding out the private sector, domestic debt does exactly the same thing.
Nigerians must and should be concerned about the profile of public debt and should raise alarm.. The total public debt of the Federal Government, comprising both external and securitised domestic debt, rose by $6.7 billion (about N1.005 trillion) in the last 10 months, from $25.82 billion as at the end of December, 2009 to $32.5 billion as at the end of September 2010. Although government officials assert that the Federal Government has vowed to keep the debt stock at 25 per cent of the Gross Domestic Product and not more; total debt to GDP ratio stood at 28.6 per cent in 2005. When Nigeria got the famous debt relief from the Paris Club of Creditors, the ratio dropped significantly to 12.39 per cent in 2006. It was 11.67 per cent in 2007, 11.77 per cent in 2008, 13.88 per cent in 2009 and 16.8 per cent in 2010. It is rising and must be checked more so when the debt is not project-based but for payment of salaries to few government officials.