Monday, May 29

Nigeria’s Debt Crisis: A Journey to Where?

At The Maroonsquare Discourse on National Development held on the 28th and 29th of March, 2019 held at the Science Auditorium, Federal College of Education (Tech), Akoka, Yaba, Lagos sponsored by the Rosa Luxemburg Foundation. Prof. Odion-Akhaine discusses the issue of Nigeria’s rising debt profile. Below is an excerpt of the paper delivered.

How about the future? We must learn from the past. We must all show collective responsibility to prevent a return to the past. We must all commit ourselves to protecting, rather than squandering the future of our children. We must all agree not to remove the solid blocks on which our nation stands by accumulating debts that we cannot repay. May God never let us go through this painful path again (Obasanjo, 2005).

                Historical amnesia is a dangerous phenomenon, not only because it undermines moral and intellectual integrity, but also because it lays the groundwork for crimes that still lie ahead (Noam Chomsky, 2016).


The international financial institutions (IFIs) have since 2016 been sounding the alarm bell with regard to borrowing by the Nigerian government and other African countries. In 2016, the African Development Bank (AfDB) warned African governments, including Nigeria to be cautious about international borrowing given the consequences of reckless external borrowing such as decline in revenues, indebtedness and budget deficits. Also, Mr. Hafez Ghanem, the World Bank Vice President for Africa advised the Nigerian government to slash its borrowing. In addition, researchers have also pointed attention to the deluge of bonds being issued by Nigerian government and other countries in the continent (Kvangraven, 2016). The IFIs warnings would appear ironic given the fact that their policies in the 1980s encouraged many third world countries into borrowing and consequently sorrowing over debt overhang. The Guardian did not miss the streak of irony. In its editorial of 21st November, 2018, it noted that: 

          The incumbent administration has been especially fortunate to receive notes of caution from sundry international financial institutions (IFIs) regarding its preference to borrowing. This is intriguing because in the past, IFIs nudged distressed countries into more borrowing to the extent that they had their sovereignties undermined. As some have observed, the story behind lending is not altruistic neither is it based on enlightened self-interest (The Guardian, 2018). 

In spite of these warning, Nigeria government has tended to behave like the proverbial mad dog, hard of hearing and destined to be sacrificed to the gods. Its officials have excitedly underlined the point that the country is still within a safe haven of accessing loans and argued that the country’s Debt-to-GDP ratio put at 21 per cent is within international threshold of 55 per cent. According to Director of Information, Federal Ministry of Finance, Mr. Salisu Na’Inna Dambatta,

          Nigeria’s debt to GDP ratio is low when compared to our contemporaries in Africa, and across most of the developed world. We have headroom to borrow
and are doing so aggressively in the short to medium term in order to address
our infrastructure deficit and to stimulate growth. 

Again, over this excitement, The Guardian jolted the memory of forgetful officials on their very nature and wrote off such excitement as tantamount to ―…walking on the path of illusion given the character of the Nigerian state elite who are not only disoriented but wasteful and unpatriotic.
They lack integrity to manage any form of foreign loans.

Nigeria: Current Realities 

Sadly, Nigeria is in another debt loop and the noose is tightening. In 2017, the executive got approval from the Senate to borrow $3 billion from the international capital market (ICM) through a Eurobond or Diaspora Bond issue or a combination of both to refinance maturing domestic debts, and raise another $2.5 billion from multilateral donor institutions to fund the
capital component of the 2017 budget. In the same 2017, Nigeria’s debt profile released by the debt Management office was looking dismal. Nigeria’s debt stock hit N20 trillion as of September 30, 2017. The foreign component accounted for 23.04 per cent or N4.694 trillion ($15.40 billion) of the total debt stock (see table below). 


External Debt                        $15,5.13                          N4,693,913.75 

Domestic debt (FGN)            $40,869.29                   N12,95,784.04 

Domestic debt (states)          $10,412.86                     N3,183,730.80  

Grand Total                            $ 66, 634.27                 N20, 373, 428.59 

This has blossomed to frightening levels in the last one year. The external debt profile was $22.08 billion in June 30, 2018. It is to be noted that as at March 2015 the country’s external debt stood at about $9.4 billion. Aggregate public debt was about $63.5 billion and is currently in the threshold of $73.2 billion. Besides, about two-thirds of government’s revenues would go into debt servicing. In this respect, the government would require about $2.8 billion external loan to bridge the apparent fiscal deficit in the 2018 budget over which it has issued Eurobond. In the 2019 budget, unbalanced about N2,264,014,113,092 only, is for Debt Service. The same argument is that government is still within the safe belt of borrowing. The senate leadership is apprehensive about the rising debt profile and notes that ―…money must be sought for by any government to fund infrastructure but it must not be solely anchored on borrowing which in the long run, will take the country back to a problem it had earlier solved. 

The Path to Overhang: 

As I have argued elsewhere, the relationship between the lender and the lendee is due to resource differential that makes inevitable some measure of interdependence (Akhaine, 2012). View as relationship between countries, the point must be made that not all countries are equally endowed in terms of human and natural resources making inevitable interdependence. The story of the capitalist global economy goes beyond this. It is underpinned by primary uneven development occasioned first by mercantilism and subsequently slave trade and colonial plunder. The primary uneven development is reinforced by what I have articulated as secondary uneven development which are the effect of policies of imperialist forces in the third world that ensure that the gap between the rich and poor countries are not equalized. My conception of secondary uneven development is distinct from the common usage, namely, the uneven development within the developed world. This is perhaps why Bade Onimode (1989) is right to have read the debt crisis as ―silent war of recolonisation‖ and assumed contradictory status in terms of its affront on the continent of Africa and other third world enclaves in Latin America and Asia.

Nigeria’s external debt crisis is caused by a number of factors, namely, ideology, structural factor, patterns of accumulation, and collaborating bourgeois elite. I shall expatiate on these factors seriatim. The ideological takes on definitiveness due to the neoclassical emphasis on the importance of capital in the development process. Those who lack capital are somewhat obligated to borrow. In accounting for the economic crisis of the 1980s, Onimode (1989:11) was quite right to have averred that the cause of the debt crisis ―lies fundamentally in the bogus bourgeois theory that poor countries must have foreign capital before they can develop‖. The structural factor lies squarely in the colonial economic edifice which extroverted economic production and exchange. Onimode calls it the neocolonial capitalist structure of the economy dependent on the international capitalist system. This of course arose from the ―perverse logic of colonial division of labour between Nigeria and global imperialism‖. The net effect is manifested in the excessive reliance on imports and export of primary products. Today, there is a fundamental shift to export of crude oil. 

The primitive pattern of accumulation of resources in an enclave economy like Nigeria is culpable in the external debt crisis. As Onimode (2005:389) has observed:

           The pattern of capital accumulation in the country also has a built-in commitment to crisis. The basic issue here is that the profile of national accumulation is essentially unplanned and speculative. This generates frictions, and even conflicts, of accumulation between the three main branches of capital in the country—public (State), foreign and indigenous capital, and between productive and intermediary capital. 

As in previous cycles of crises, the enclave economy continues to feed the venality of public officials and the bleeding of national resources continues without let. Between 2015 – 2018, the country slipped into recession based on macro indicators while the foreign reserve also plummeted and simultaneously foreign direct investment took flight because of the largely unstable political environment. Lean resources meant that the country would have to resort to borrowing to balance a deficit budget and to meet balance of payment obligation. As Hertz (2005:113) has rightly observed on the debt question in the developing world:

          All the debt had produced was, in fact, more debt. There was a debt overhang that stifled private investment growth, and development, and took desperately needed resources away from cash-strapped government budgets. Tanzania, for example, spent $155 million on debt repayments during 1993 and 1994, twice of what it invested in that period in providing safe drinking water—this despite the fact that fourteen million people, half its population at the time, lack access to clean water.

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Prof. Sylvester Odion-Akhaine earned is the Postgraduate Coordinator, Department of Political Science, Lagos State University, Nigeria. A Contributing Editor to the UK-based Review of African Political Economy, he is also the Editor of The Constitution, arguably, Nigeria’s leading interdisciplinary journal. Besides, he was the former General Secretary, Campaign for Democracy in Nigeria and Chair, Board of Trustees of the Centre for Constitutionalism and Demilitarisation. He is the Author of Patrons of Poverty: IMF/World Bank and Africa’s Problem (2015). His edited volume, United Nations, Globalisation and the Fringe Players (2001) is listed in the Longman Bibliography on Economics.  

Copyright © Prof. Sylvester Odion-Akhaine, TheMaroonsquare, 2019

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