Prof. Kingsley Moghalu, former Central Bank of Nigeria (CBN) deputy governor wants the Federal Government to stop its massive piling of debts, insisting that infrastructure investment used to justify it, has grossly underperformed.
Instead of the debts delivering economic growth, Muoghalu said in a statement on Thursday night, “the economy has been twice in recession, and when out of it, growth has been underwhelming at 2% at best.
“And rather than the debt-funded infrastructure projects creating an ample number of jobs for the citizens, the national unemployment rate has increased to 33.1% while youth unemployment has reached 42.5%,” he stressed.
The statement is coming against the backdrop of approval by Nigeria’s National Assembly of President Muhammadu Buhari’s request for N2.343tr ($6.183bn) as External Borrowing in the 2021 Appropriation Act, to be sourced through the Issuance of Eurobond in the International Capital Market
For Muoghalu, a presidential candidate in the 2019 general election, Nigeria’s public debt has increased at an unprecedented, alarming, and unsustainable rate over the last six years, from $10.31bn at the end of June 2015, to $32.85bn at the end of March 2021.
This, he continued, represents a 218% increase, with total outstanding public debt stock soaring by 173% within the period, from N12.11tr to N33.1tr, translating to over N3.6tr is being added to the public debt annually, on average.
“Under a scenario of a coordinated economic policy by a competent government, the debt capital outlay would have catalyzed private sector investments and sizeable foreign direct investment (FDI) flows into the economy.
“Public-private partnerships should be the dominant approach to infrastructure development in a country like Nigeria, instead of contract awards that, from information available from comparable projects in countries such as Ghana and Ethiopia, are at best overvalued and, at worst, grossly inflated in their costs. But in the real situation of the incompetence of the government in the last six years, businesses have been groaning and FDI inflows have decreased,” he stressed further.
Continuing, Muoghalu said over the past months, the country’s debt service cost has gulped over 90% of government revenue, meaning that “for every one naira generated in public revenue, more than 90 kobo is used to pay the interest on government’s loans. It is debilitating that Nigeria is spending so much money that should go to development toward merely servicing the interest on our debt, not repaying the debt. It also makes justifications based on our debt to GDP ratio off-point.”
He warned that “the country is now on a dangerous, debt-induced fiscal cliff. Put simply, the Government of Nigeria is mortgaging the future of our country’s youth. We have to stop further borrowing and start to manage the current obligations in order to avoid a sovereign debt default or, at best, a costly restructuring. Further borrowing will lead to a disastrous debt bubble bust.”
As alternatives to debt, he challenged the government “to focus on increasing domestic revenue, by expanding the tax base – not by increasing tax rates as has been done with the value-added tax (VAT) – and by introducing reforms for ease of paying taxes while abolishing multiple taxations.
“Taxation requires the government to maintain a social contract with the people. At the minimum, the government must restore security to the country so that citizens can go about their business, assured of their safety.
“When I ran for president in 2019, I said I would introduce a forensic audit of the budgets if elected, as part of a broader reform initiative for transparency and accountability in public finance. This remains very important for ensuring value for money and supporting public revenue growth by restoring investor confidence in the economy. To realize a positive long-term public revenue outlook, the economy must be successfully diversified through value-added exports,” he added.
