How to tackle Nigeria's $32.85b public debt - Moghalu

Convener of Moghalu4Nigeria Movement (M4N), Prof. Kingsley Moghalu has proffered solutions to Nigeria’s rising debt profile.

The debt stood at $32.85 billion as of March 2021.

The way out, he said, was for the Federal Government to embrace Public-Private Partnership (PPP) and focus on increasing domestic revenue by expanding the tax base.

Moghalu, a one-time former deputy governor (Financial System Stability) at the Central Bank of Nigeria (CBN), kicked against raising tax rates as the government did with the Value Added Tax (VAT).

Rather, he suggested the introduction of reforms for ease of paying taxes and abolishing multiple taxations.

Taxation, Moghalu insists, requires the government to maintain a social contract with the people, including restoring security to enable citizens can go about their businesses.

He disclosed that Nigeria’s public debt profile rises by over N3.6 trillion annually, making it difficult for the government to deliver economic growth.

He said that the massive borrowing, and the infrastructure investment that has been used to justify it, have grossly underperformed.

Moghalu urged the government to quickly halt the borrowing binge, which is exposing the country to possible future debt slavery.

The former CBN chief said the advice became necessary considering the fact that Nigeria’s external debt of $10.31 in 2015 had doubled six years after.

He spoke of the possibility of a rising debt portfolio by 2023 when President Muhammadu Buhari’s two-term tenure of eight years will end.

Moghalu said the debt profile was not only unprecedented but unsustainable and alarming.

He said: “This borrowing binge 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.”

He described it as unfortunate that the economy, instead of delivering economic growth, had been in recession twice, and when out of it, growth had recorded at best two per cent.

“And rather than the debt-funded infrastructure projects creating 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”, he said.

Insisting on PPP as the dominant approach to infrastructure development, the erstwhile CBN official kicked against contract awards.

Relying on information from comparable projects in Ghana and Ethiopia, among others, he said projects are at best overvalued and grossly inflated.

But due to the incompetence of the government in the last six years, he said, 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.

He explained that for every one naira generated in public revenue, more than 90 kobos is used to pay the interest on the government’s loans.

Moghalu said: "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 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,” he said.

Further borrowing, Moghalu advised, would lead to a disastrous debt bubble bust.

He recounted how he promised to 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,” he emphasises.

He concluded that to realise a positive long-term public revenue outlook, the economy must be successfully diversified through value-added exports.