The recent announcement by the Minister of Finance and Coordinating Minister for the Economy, Mr Wale Edun, regarding Nigeria securing a 1 per cent interest loan of $2.2 billion from the World Bank, coupled with another budget support from the African Development Bank, raises significant concerns about the country’s fiscal management and long-term economic sustainability.
While such loans may offer temporary relief, there is a growing apprehension that Nigeria’s borrowing practices are setting the stage for a looming debt crisis.
At the heart of the issue lies the alarming projection that Nigeria’s debt service to revenue ratio is expected to skyrocket to 76 per cent by 2025. This dire forecast paints a grim picture of the country’s financial health, with a substantial portion of revenue earmarked for servicing debts rather than addressing critical socio-economic needs.
Furthermore, there are valid concerns about how borrowed funds are being utilised. Despite assurances of investment in infrastructure and development projects, there is evidence to suggest that loans are often diverted towards non-productive expenditures such as salary payments, buying official cars, giving grants and travel expenses. This misallocation of resources not only undermines the efficacy of borrowing but also perpetuates a cycle of debt accumulation without tangible benefits for the populace.
The federal government must heed calls for greater transparency and accountability in the management of borrowed funds. Questions must be raised about the efficacy of Nigeria’s borrowing strategy and the prudent utilisation of resources. The prevailing narrative of loans being squandered on frivolous items instead of critical capital needs underscores the urgent need for reform and oversight.
Moreover, the revelation that a significant portion of the 2024 budget – a staggering N8.25 trillion out of N27 trillion – which was allocated to debt servicing raises serious concerns about the prioritisation of expenditures. With such a substantial sum dedicated to servicing debts, the government’s ability to address pressing socio-economic challenges becomes severely compromised, potentially hindering efforts to stimulate economic growth and improve living standards.
The federal government must undertake a comprehensive review of its borrowing strategy and expenditure priorities. Now is not the time for reckless fiscal management but rather a concerted effort to ensure that every penny is accounted for and allocated towards projects that foster sustainable development and benefit all Nigerians.
Failure to do so risks plunging the country into a debt trap from which escape may prove elusive. The time for prudent financial management and accountable governance is now.