Nigeria is asking for favor again. At the recently concluded 79th United Nations General Assembly in New York, President Bola Tinubu urged the United Nations and leaders of developed countries to prioritize debt forgiveness from Nigeria and other developing countries’ creditors and multilateral financial institutions. I requested that. Mr. Tinubu’s motives for Nigeria are impeccable.
The president’s campaign, while legitimate, overlooks the complex interplay of domestic challenges, from tax burdens to high governance costs, that are straining the nation’s economy and requiring urgent presidential action. It is said that
The annual event was represented by Vice President Kassim Shettima, who said: “To enable sustainable financing for development, reforms to the international financial system must include comprehensive debt relief. Countries in the Global South must receive special concessions. We cannot achieve meaningful economic development without reviewing our current debt burden.”
The Tinubu government inherited a debt-to-GDP ratio of 38 percent. However, the ratio rose to 52.9% due to new borrowing, a failure to address fiscal challenges such as lower oil production amid higher government spending and sluggish GDP growth. This figure exceeds the 40% debt ceiling set by the IMF for developing countries.
Data from the Central Bank of Nigeria shows that debt servicing costs consumed 74% of the federal government’s retained earnings in the first quarter of 2024. Mr Tinubu said in his Independence Day broadcast that debt servicing has decreased to 68%. Unfortunately, this has deprived the country of social amenities, infrastructure, healthcare, and other developmental aspects of national life.
Nigeria benefited from massive debt relief initiatives during the Olusegun Obasanjo administration. When Mr. Obasanjo took office in 1999, the national debt was $28.54 billion. A series of strategic initiatives have significantly reduced Nigeria’s debt to $2.11 billion.
Key to this success was a significant 31.8 percent reduction in domestic and external debt, facilitated by agreements with foreign creditors, including the London and Paris clubs.
At the time of independence, Nigeria’s outstanding debt was £17 million. The debt-to-GDP ratio fell from 75 percent in 1991 to 7.3 percent in 2008. Experts say that the oil glut in the 2010s, the COVID-19 pandemic, the #EndSARS protests in 2020, the economic crisis in 2021, the Twitter ban in 2021, and the general elections in 2023 have Debt has skyrocketed.
Obasanjo was followed by Umaru Yar’Adua, Goodluck Jonathan and Muhammadu Buhari, and Nigeria was once again plunged into a debt hole without any results to show. Debt in 2015 was $41.54 billion. Apart from reckless revenue borrowing under the Buhari administration, the debt has increased to $98 billion in 2022. In the first quarter of 2024, Nigeria had N121 trillion in domestic and international debt. This number worsened due to the depreciation of the naira.
In addition to asking international creditors to cancel the debt, Prime Minister Tinubu should assess Nigeria’s economy and initiate reforms to reduce the debt burden.
The Presidential Commission on Fiscal Policy and Tax Reform has consistently advocated for reducing the total tax rate from more than 50 to just 8, and eliminating withholding taxes and import duties on farmers and manufacturers. Tinubu needs to implement the recommendations of this committee.
The president should understand that debt cancellation comes with a reduction in governance costs. The country’s creditors would have been less likely to petition for his debt forgiveness if they had known that he had recently purchased a $150 million presidential jet and that he had spent N2.3 billion on overseas travel and related expenses. will not be taken seriously.
The government should privatize the top of the economy to ensure liquidity and step up efforts to increase domestic production of petroleum products.
