An American senator recently expressed some worries about the national debt. He might as well have been speaking about Nigeria: “Our nation stands at the crossroads of liberty. Crushing national debt, rampant illegal immigration, insane business regulations and staggering national unemployment are pushing our nation into unchartered territory.”
The late Chief S. B. Falegan, one of our leading bankers and economists of the older generation, wrote an excellent book on the origins and evolution of our debt, Nigeria’s External Debt Burden, Fountain (Publications, 1992). In 1923-24, our British colonial overlords took the first ever loan on behalf of Nigeria, in the sum of £5.7 million. With an interest rate of 2.5% payable over 20 years, the loan was officially to finance capital investments. In 1936, they borrowed another £4.89 million, leading to a total external debt outlay of £9.89 million. By 1952, Nigeria’s total debt stock stood at £6.8 million. When the British departed in October 1960, the total debt stock had risen to £17 million.
During the First Republic, the Tafawa Balewa administration embarked upon a modest domestic borrowing programme. They also took a loan of $31 million from the Paris Club, with an interest rate of 3.5% payable over 20 years. When the military took over in January 1966, the national debt had risen to $317.3 million. Remarkably, during our tragic civil war of 1967-1970, no loans were ever incurred for both the war effort and post-bellum rehabilitation and reconstruction, thanks to the exceptional prudence and sagacity of Chief Obafemi Awolowo who was the finance minister at the time.
By 1970, our total national debt stood at $1.5 billion. The wanton jamboree only began from the late seventies. I have already made reference to the first $1 billion loan that the departing Obasanjo military regime incurred in 1979. A loan we did not need, and, were, in fact, in a position to give out. The successor government of Shehu Shagari borrowed massively from the Bretton Woods Institutions and the international capital markets ostensibly to finance agricultural development programmes. Most of them turned out to be white elephants. As a young researcher, I spent months in the rural countryside evaluating some of those projects. I came across jumbo combined harvesters that were rotting away in the tropical sun. By the time Shagari was overthrown in December 1983, the national debt had ballooned to $17 billion. By 1999, it had reached the astronomical figure of $36 billion. Servicing the interest alone was gulping up about $5 billion annually.
In 2005, the Obasanjo administration negotiated a deal with the Paris Club; paying off a whopping $20 billion in exchange for debt-forgiveness of $16 billion. Whilst acting for the Governor of Central Bank of Nigeria at the time, the lot fell on me to sign the cheque for the first tranche of $7 billion. After signing the cheque, I caught fever and had to go on painkillers. Then, as now, $7 billion is not a dog’s breakfast. The Paris Club settlement freed up the fiscal space needed to embark on an ambitious institutional reform agenda. The economy grew by an average of seven per cent from 2004 to 2014.
The election of Muhammadu Buhari in 2015 coincided with yet another global financial crisis. Global oil prices plummeted precipitously. Bad luck, it seemed, had taken over from Goodluck. One of the first loans the new regime took in 2015 was a World Bank IDA credit of $1.3 billion, ostensibly for rehabilitation and reconstruction of the war-torn North-East. It is ironical that while Nigeria never borrowed to finance the civil war, we were borrowing heavily to wage a police action against Boko Haram insurgents. The regime has gone on a borrowing mania ostensibly for power, infrastructure and railway development. Most of the loans have either been stolen or frittered away. An example is the Mambila Hydro Project. After incurring billions of dollars in loans, the project has yet to see the light of day. Some of the railway rolling stock are second-hand. They have started breaking down already.
Our outstanding debt of $87 billion amounts, in per head terms, to $435; calculated as $87,000,000,000 ÷ 200,000,000 = 435 (about N222,285.00). Every national debt is ultimately a tax on future generations. When nations are forced to undertake austerity measures in order to service their debts, everybody pays a price. In the words of the great American jurist, Wendell Phillips, “Debt is the fatal disease of republics, the first thing and the mightiest to undermine governments and corrupt the people”.
The real issue boils down to the capacity to service the debt. For us in Nigeria, the debt is already accelerating towards a dangerous threshold. We are a poor country. In a situation of rising debt, we may find that budgetary resources that could otherwise have gone into building critical infrastructure and developing our human capital are increasingly diverted to servicing debt. The external component of the debt exposes us to geopolitical and exchange rate risks. When the naira is devalued against a rising dollar, we would need to earn more naira just to service our debt. Increasing debt servicing obligations also tend to reduce the accretion to external reserves. This in turn could further depress the exchange rate; signalling to foreign actors that we are becoming insolvent. The international ratings agencies keep watching like hawks. They can lower their ratings at a blink, which in turn increases the cost of borrowing from the Eurodollar market.
The late President John Magufuli of Tanzania was offered a $10 billion loan by the Chinese. When he saw that in the fine little print, they were asking to lease the Port of Dar Es Salaam for 99 years, he refused, declaring that “only a madman could accept such terms”. He decided to concentrate, instead, on boosting domestic revenue; reducing foreign travels and rigorously implementing infrastructure projects. The results were outstanding. Magufuli showed to the world that Africa can prosper without dependence on foreign capital. At the time of his death in March this year, Tanzania was enjoying one of the fastest growth rates in the world. His accomplishments in infrastructure development were legendary.
There are crucial lessons for us. From where I stand, I could never say, “don’t borrow”. But if we must, let it strictly be for infrastructure and other projects with calculated guaranteed returns on investment. We should also cut back on the cost of governance while plugging the loopholes that haemorrhage our foreign exchange. We must also eliminate grand larceny while revamping our pork-barrel leadership traditions.
We must understand that debt peonage is a form of re-colonisation. In Zambia, Kenya, Madagascar, Ethiopia and Djibouti, the Chinese have collateralised vital national assets against their loans. In the words of the poet, Ezra Pound, “Wars in old times were made to get slaves. The modern implement of imposing slavery is debt”. The collective wisdom of the centuries teaches that nations, as much as individuals must learn to live within their means. As the poet, Henry Wadsworth Longfellow, declared long ago, a debt-free man “looks the whole world in the face, for he owes not any man”.
We must always hold government accountable for how borrowed funds are used. The National Assembly must also live up to its constitutional mandate as watchdog where public finances are concerned. I also worry about the rumoured collateralisation of our Niger Delta oil fields to the Chinese. The Minister of Transportation seemed to have confirmed that we have even mortgaged our sovereignty to the Chinese as collateral for their loans. On national TV, he was quoted as remarking that pledging our sovereignty was not such a big deal. Such ignorance is dangerous. And using borrowed funds to build railways and refineries in Niger Republic is a millennial folly, if not treasonable. It is patently injurious to the integrity of government and our dignity and honour as a people.
The clarion call to leadership in our era is to reinvent Nigeria as an enlightened, progressive technological-industrial state — a prosperous democracy. We must reinvent government as a servant state that serves the people and not a Leviathan that sucks their blood. In the words of Barack Obama: “Change will not come if we wait for some other person or some other time. We are the ones we’ve been waiting for. We are the change that we seek.”
