On June 17, 2020, I sounded an alarm to the nation that our debts have reached unsustainable levels, and were consuming over 90% of our revenue in debt servicing.
That warning was a patriotic one, devoid of partisanship, and was meant as a wake up call to prevent the nation from going into insolvency.
At that time, I said:
‘We are on a precipice and if revenue figures do not rise quickly, Nigeria risks a situation where revenue cannot even sustain its debt servicing obligations. Meaning that we may become insolvent and our creditors may foreclose on us, as has occurred in Sri Lanka and the Maldives.’
I also further said:
‘As part of an administration that paid off Nigeria’s entire foreign debt, I am concerned about the unprecedented increase in our debt to Gross Domestic Product (GDP) ratio and debt-to-revenue ratio. The alarm I sounded last year is now sounding louder.’
Thereafter, solutions were offered to the government in power as a way out of the impending economic crisis.
To my surprise, the government called a press conference and attacked my person for raising the alarm and denied what was obvious.
Interestingly, yesterday, (Thursday, August 26, 2021) the Budget Office of the same administration released a statement to the effect that Nigeria made ₦2. 23 trillion revenue in the first half of 2021, and spent ₦2.02 trillion on debt servicing, representing 90.58% of National revenue in the period under review (H1).
Although this clearly vindicates me, I have no joy that things have gotten to this stage.
Once again, I call on the government to revisit the solutions provided in my June 17, 2020 statement and other interventions made earlier by other patriotic Nigerians and my humble self. Nigeria is the only country we have, and we must all do everything possible, irrespective of party affiliation, to keep our nation financially solvent for future generations.
You may find attached a copy of my statement of June 16, 2020.
Nigeria In Financial Crisis: Robbing Our Children to Pay for Our Greed
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%.
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. Meaning 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.
Again, on May 15, 2020, I counselled that the Federal Government ought to reduce Nigeria’s budget by at least 25%, 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.
As a matter of utmost urgency and importance, I call on 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!
Vice President of Nigeria, 1999-2007.
16th June, 2020.