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Atiku, federal government spar over “apocalyptic scenarios” of Nigeria’s debt crisis

Former Vice President and the presidential candidate of the leading opposition Peoples Democratic Party (PDP) in the 2019 election, Alhaji Atiku Abubakar and the Nigerian government are squaring up at the “apocalyptic scenarios” national debt with Atiku raising the alarm that Nigeria’s debt has become a huge problem for the country.

In a personally signed Press Release issued on Tuesday, Atiku, lamented that Nigeria was already at the precipice.

According to Atiku, “nothing has shocked me in my entire life in public service as the revelation from Nigeria’s First Quarter 2020 financial reports in the Medium Term Expenditure Framework and Fiscal Strategy from the Federal Ministry of Finance, Budget, and National Planning, which shows, alarmingly, that whereas Nigeria spent a total sum of ₦943.12 billion in debt servicing, the Federal Government’s retained revenue for the same period were only ₦950.56 billion.

“This means that Nigeria’s debt to revenue ratio is now 99 per cent. No one should be deceived. This is a crisis! Debt servicing does not equate to debt repayment. The reality is that Nigeria is paying only the minimum payment to cover our interest charges. The principal remains untouched and is possibly growing. We are at a precipice. If our revenue figures do not go up, and go up quickly, Nigeria risks a situation where our revenue cannot even sustain our debt servicing obligations.”

The implication of this, he said, is “that we may become insolvent, and our creditors may foreclose on us, as has occurred in Sri Lanka and the Maldives. In my opinion editorial of December 17 2019, titled ‘Endless Borrowing Will Lead Nigeria to Endless Sorrowing’, I had cause to counsel the Federal Government to desist from indiscriminate lending, and offered suggestions on ways to both increase revenue, and reduce expenditure, however, my counsel fell on deaf ears. And now we have come to this. 

“I counselled that the Federal Government ought to reduce Nigeria’s budget by at least 25 per cent, to reflect the economic realities of the times that we live in. Again, my entreaties were brushed aside. As part of an administration that paid off Nigeria’s entire foreign debt, I am concerned by the alarming and avoidable unprecedented increase in our debt to GDP ratio and debt to revenue ratio. The alarm I sounded last year is now sounding louder. 

“Not only have we squandered our opportunities, we have also squandered the opportunities of our future generations by bequeathing them debt that they neither incurred or enjoyed. The Federal Government to take immediate steps to drastically reduce its expenditure, especially on wasteful projects, such as maintenance of the Presidential Air Fleet, and unnecessary renovations of buildings that could serve as is, limousine fleet for top government officials, overseas travels and treatments, and the ₦4.6 billion Presidential villa maintenance budget, etc. 

“We cannot be on the verge of economic ruin, while still maintaining a Presidential Air Fleet that has more planes than the Presidential fleets of those from whom we take these loans. In fact, Nigeria must sell those planes and channel the revenue to other vital areas of need, while taking additional steps to reduce the cost of running our government. 

“The Federal Government cannot continue to justify these unsustainable numbers by pointing at Nigeria’s debt to GDP ratio. That is only half the picture. Our debt to revenue ratio paints a much more realistic portrait of our financial situation, especially as our revenues are majorly tied to a mono product, oil and gas, which are very vulnerable to global shocks. 

“Again, I warn that Nigeria is facing a crisis, and we cannot continue to keep up appearances by taking out more loans to prop up our economy. That will amount not just to robbing Peter to pay Paul, but to robbing our children to pay for our own greed!.”

However, the Federal Government said that Alhaji Atiku’s “apocalyptic scenarios” on the
country’s debt profile “is nothing but scaremongering anchored on a false premise.”

Minister of Information and Culture, Alhaji Lai Mohammed, said in a statement issued in Abuja on Wednesday that while the Federal Government welcomes constructive criticism, such must be based on
verifiable facts rather than conjectures and innuendos.

”There is no doubt that former Vice President Atiku Abubakar loves our country and wishes it well, otherwise he would not have sustained his serial quest for the country’s highest position. One can only hope that his resort to the use of such words as ‘precipice’, ‘foreclosure’ and ‘economic ruin’ does not reflect anything but best wishes for the country at this time,” he said.

Alhaji Mohammed said the figure of Nigeria’s debt to revenue ratio of 99 per cent in the first quarter of 2020, quoted by the former Vice President, is not in the Medium-Term Expenditure Framework and Fiscal Strategy Paper, where he claimed he got it from.                                                                                                                                                                                                                                                                                                                                 ”We are also not able to ascertain the source of the first quarter figures of N943.12 billion for debt servicing and N950.56 billion for retained revenue, which he also quoted,” he said..

The Minister said the debt service provisions in the annual budgets include principal repayments, interest payments and all other applicable charges, adding: ”Therefore, the statement that debt servicing does not equate to debt repayment is not only wrong, but ill-informed.”

On the former Vice President’s assertion that revenue needs to go up, he said this Administration has introduced several measures to shore up revenues, listing some of the measures as the passage and implementation of the Finance Act, 2019, various on-going reforms in the Oil and Gas, Tax Administration and Collections, as well as the
Strategic Revenue Growth Initiatives.

Furthermore, Alhaji Mohammed said, since Nigeria’s debt service is expressly provided in the annual budgets and the debt service payments are made as and when due, the issue of creditors foreclosing on Nigeria, as strangely predicted by the former Vice President, does not arise.

He said contrary to the statement credited to Alhaji Abubakar that Nigeria has experienced alarming and unprecedented increase in the ratios of debt to GDP and debt service to revenue, indeed, Nigeria’s ratio of debt to GDP is one of the lowest in the world at 19.00 per cent as at December 31, 2019, while Government is making concerted efforts to increase revenue so as to bring down the ratio of debt service to revenue.

”One of the reasons why debt service to revenue is high is because revenue generation in Nigeria has been low, with over-dependence on the oil sector. This is corroborated by the fact that the ratio of Nigeria’s tax revenue to GDP is one of the lowest in the world at about 6%,” the Minister said.

He said unlike what obtained in the past, when the nation borrowed to service the crass indulgence of a few fat cats, the loans being obtained by the current Administration are being primarily used to finance infrastructure projects, which include roads, railways, bridges and power, and the loans are long-term in nature, which would benefit present and future generations.                                       
  
”We have said that in the face of massive infrastructural decay, no responsible government will sit by and do nothing. This Administration’s borrowing, therefore, is aimed mostly at revamping our infrastructure. The loans for the educational sector will contribute to the development of our human capital while the loans for the agricultural sector will help the move to diversify the economy,” Alhaji Mohammed said.

He said despite the negative impact of the Covid-19 pandemic on the country’s economy, the Federal Government has continued to take measures to mitigate the effects of the pandemic, and assured that the Government will always act in the best interest of Nigerians.

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