Buhari Massive Borrowing Has Reversed Nigeria’s Debt Relief Gains Made Under Obasanjo’s Govt

In a bid to accomplish the removal of fuel subsidy, President Muhammadu Buhari requested a fresh $800m loan from the World Bank to help Nigeria expand its National Social Safety Net Programme (NASSP).

The loan will be used as palliatives for the people categorised as poor in Africa’s most populous nation.

Fuel subsidy costs Nigeria $850m monthly which has become unsustainable but experts believe taking a fresh loan to sustain its social investment programme for poor and vulnerable Nigerians is a double-edged sword.

“You may wish to note that the federal government of Nigeria under the conditional cash transfer window of the programme will transfer the sum of N5,000 per month to 10.2 million poor and low-income households for a period of six months with a multiplier effect on about 60 million individuals,” the President wrote to the Senate.

Nigeria’s debt stock managed by the DMO as of December 2022 was N46.25trn or $103.1bn.

Domestic debt made up N27.5trn or $61.4bn.

The external debt profile accounts for $41.69bn, an increase from the $7.35bn external debt he inherited from the Goodluck Jonathan administration.

With the securitisation of the N22.7trn ($50.6bn) debt, domestic debt will balloon to N50.2trn or $112.03bn from N27.5trn ($61.4bn).

This is a significant rise of 82.5 per cent.

Historically, external debt inherited by Obasanjo was $28.04bn in 1999 which grew to $36.99bn in 2004.

In October 2005, Nigeria and the Paris Club announced a final agreement for debt relief worth $18 billion and an overall reduction of Nigeria’s debt stock by $30 billion.

Nigeria paid an initial $6bn to qualify for debt relief.

$8.2bn of the debt was bought back at discount and paid off the final $6bn at a 60 per cent discount.

Obasanjo left a debt of $2.17bn for his successor Umaru Musa Yar’Adua. Yar’Adua left office leaving an external debt of $2.58bn in 2010. At the end of Jonathan’s tenure in 2015, the external debt was $7.35bn.

Members of Buhari’s government like the Director General of the Budget Office of the Federation, Mr. Ben Akabueze had raised the alarm that the nation’s debt profile was becoming unsustainable.

An expert, Kalu Aja believes Buhari’s borrowings is uninformed and a reversal of a landmark debt relief accomplishment made under former President Olusegun Obasanjo.

He said, “All the debt relief work done by President Obasanjo and Ngozi Okonjo Iweala has been undone by President Buhari. The economic consequence of having economic illiterates in power who fail to take economic advice.

“For the economic illiterates, when OBJ became President, Nigeria owed about $44b but had borrowed less than $5b, the increase was on interest on Interest, fines etc.

“Thus, OBJ paid cash and bought back Nigerian debt in a deal. No other nation has been offered that ever again.

“If we had not cleared that $44b, it would be $100b today based on high-interest rates and negative compounding. It’s like borrowing at 21 cent a month from your credit card to fix your bus which earns 5 per cent a year in return.”