Former Presidential Candidate, Kingsley Moghalu says the accumulating debt President Muhammadu Buhari has incurred is forfeiting the future of the country’s youths.
He said over the past months, debt service cost has taken up more than 90 per cent of government revenue.
According to him, it means, for every one naira generated in public revenue, more than 90 kobo is used to pay the interest on government’s loans
He, then, advised the Buhari-led government to stop borrowing, adding that further debts will amount ‘to a disastrous debt bubble bust.’
Moghalu said this in a statement he released made available to SaharaReporters on Thursday while reacting to the recent Senate’s approval of N2.3 trillion foreign loan.
“The rate at which Nigeria’s public debt has increased in the last six years is unprecedented, alarming, and unsustainable. From $10.31 billion at the end of June 2015, the total external debt increased to $32.85 billion at the end of March 2021, which represents a 218 per cent increase.
“The total outstanding public debt stock increased by 173 per cent in the same period, from N12.11 trillion to N33.10 trillion. On the average, over N3.6 trillion is being added to the public debt annually,” the former United Nations official lamented in the statement.
Moghalu, a former deputy governor of the Central Bank of Nigeria, enumerated the adverse effects of the nation’s mounting debts which are underwhelming 2 per cent growth and 42.5 per cent youth employment.
He bemoaned that Nigeria has continued to earmarked funds for capital development to debts servicing.
“This massive borrowing, and the infrastructure investment that has been used to justify it, have grossly under-performed. Instead of delivering economic growth, the economy has been twice in recession, and when out of it, growth has been underwhelming at 2 per cent 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 per cent while youth unemployment has reached 42.5 per cent.
“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.
“Over the past months, debt service cost has taken up more than 90 per cent of government revenue. This means, 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.
“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,” the ex-deputy CBN governor said in the statement.
Speaking on remedies, Moghalu advised the Nigerian government to focus on increasing domestic revenue and also introduce tax reforms that would make paying taxes convenient and also eliminate multiple taxation.
“As alternatives to debt, the government needs 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 taxation.
“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 to support public revenue growth by restoring investor confidence in the economy. To realise a positive long-term public revenue outlook, the economy must be successfully diversified through value-added exports,” the statement added.