KEY POINTS
- Nigeria is currently saddled with a total debt of N121.67 trillion as of Q1 of 2024.
- Afe Babalola draws attention to the damaging effect of the economy burden of debt on the economy and public services.
- Suggestions include debt forgiveness, reviving national oil refineries, lowering the cost of governance and publicity for agriculture.
Legal luminary and elder statesman Afe Babalola raises alarm over increasing debt burden of Nigeria putting the country’s debt burden at N121.67 trillion. Although the Paris and London Clubs have granted debt waivers in the past, the country also has the highest debt in Sub Saharan Africa.
A troubling debt history
Loans to finance important infrastructure projects date Nigeria to public debt as far back as the colonial era. By the end of British rule, Nigeria owed $31 million. But the nation’s debt has ballooned since then, and particularly since the 1970s, when foreign borrowing grew under military rule.
Also, it is public knowledge that Nigeria’s debt situation got worse under successive administrations. Borrowing, either domestic or external, reached a crescendo during the democratic governments of the Fourth Republic. The country’s debt has continued under the current administration, Nigeria’s debt as of 2024 will amount to N121.67 trillion including $42.12 billion external debt.
Growing debt concerns
Now we spend more on debt service than on basic services. Debt repayments in January 2024 alone was N755.9 billion, while federal revenue was N450.7 billion. Nigeria’s debt-to-revenue ratio now stands at 168 percent, sparking fears that it is paying debts with more debt.
Moreover the country’s already massive debt pile has been increased by recent loans, which include a $1.57 billion World Bank loan and an $8.8 billion oil backed loan. According to Vanguard, Babalola questions the effectiveness of these borrowings, asking ‘Where do these loans get funded?’
To address this dire situation, Afe Babalola offers several urgent recommendations
1. Debt Forgiveness: Besides, Nigeria should follow the way that the former President Olusegun Obasanjo treaded; asking for debt forgiveness or at least waiver on interest payments.
2. Debt Investigation: They may also want to establish committees to audit ours and the country’s borrowing, to see where the money was going and how it was used.
3. Oil Refinery Revamp: Save billions in government expenditures by revitalizing national refineries to minimize the yearly dependence on imported refined oil.
4. Cost of Governance: It would reduce the cost of governance generally, especially by reverting to the First Republic’s practice of sitting allowances only for lawmakers.
5. Infrastructure Focus: Cut the need for unneeded political spending first, and develop the infrastructures.
6. Fight Corruption: With all recovered proceeds of corruption, service the national debt.
7. Agricultural Development: The wealth generation through politics should be discouraged and also diversified through the economy by investing in agriculture.
A call for political will
Babalola remains hopeful that the gloomy economic outlook will be reversed, and Nigeria can be rescued with the right political will.
He also warns that decisive action must be taken to avoid further economic deterioration before it’s too late for action.
The country needs a strategic plan to deal with its debt, revive an economy, and better manage foreign exchange reserves.
