Financial experts, Non-Governmental Organisations (NGOs) and other relevant stakeholders at Heinrich Boll’s conference on Nigeria’s debt, development and climate challenges in Abuja on Wednesday advised the Nigerian government to reduce foreign commercial loans, establish specific debt performance auditing mechanism as well as improve public borrowing transparency and accountability to avoid having unsustainable debt.
They also called for the review of the global financial architecture with particular focus on the global development finance institutions, especially the World Bank and the International Monetary Fund (IMF), among others.
The financial experts and executives of NGOs who spoke at the hybrid event include the former governor of the Central Bank of Nigeria, His Royal Highness, Malam Sanusi Lamido Sanusi, who gave the keynote address; Mma Amara Ekeruche, senior research fellow, Centre for the Study of Economies in Africa (CSEA); Chinedu Bassey, programme manager, Civic Society Legislative Advocacy Centre (CISLAC); David Ugolor, executive director, African Network for Environmental and Economic Justice (ANEEJ); Jason Braganza, executive director, African Forum and Network on Debt and Development (AFRODAD); Ulrich Volz, Centre for Sustainable Finance at SOAS, University of London, and Sodiq Okoh, research fellow, Centre for Climate Change and Development.
In his keynote address, Sanusi identified the problems facing Nigeria currently to include rising inflation which recently hit 22.79 percent in June 2023, increasing public debt, as well as low external reserves.
He said: “Debt to revenue ratio increased from 96 percent in 2021 to over 100 percent in 2022 against the level prescribed for low-income countries recommended by the World Bank. Inflation was fuelled by the Central Bank of Nigeria’s Ways and Means.
“The rising public debt constrained the government’s ability to finance infrastructure projects. Climate worsens ecological damage. Research has shown that countries with high debt burdens are more vulnerable to climate change, thus creating a vicious cycle.”
On climate change, he said it is one of the causes of the farmer-herder conflict in Nigeria and that Nigeria has limited financial resources due to little private sector engagements.
Amara Ekeruche traced the rising public debt in Nigeria to the change in the structure of Nigeria’s external debt from more of bilateral debts as of 2000 to more of private and multilateral debts in 2020. According to her, while bilateral debts have lower interest rates and longer tenors, private debts in particular have short tenors and higher interest rates, thus skyrocketing interest payment as a share of public revenue in the last decade.
“After the debt relief that Nigeria got, most bilateral creditors became wary of lending Nigeria money. Their conditions became more stringent. As a policy response, Nigeria opted for multilateral and private creditors who gave us loans at higher interest rates and short tenors. This move has created more debts to be accumulated,” she said.
David Ugolor emphasised the need to follow Nigeria’s Debt Management Strategy 2020-2023, which was formulated to guide the borrowing activities of the government in the medium-term, noting that borrowing from either domestic or external sources should be in line with the funding structure of the Medium-Term Expenditure Framework (MTEF), just as the country should maximise cheaper and long-tenored funds.
He listed some of the multilateral financing architectures to include the Heavily Indebted Poor Country Initiative (HIPC), the Multilateral Debt Relief Initiative (MDRI), Debt Service Suspension Initiative (DSSI), G20 Debt Initiative, among others.
“The DSSI enabled a fast and coordinated release of additional resources to beneficiary countries that were severely affected by the COVID-19 crisis. The initiative, according to the World Bank, had delivered more than $5 billion in relief to more than 40 eligible countries, including Nigeria. The suspension period, originally set to end on December 31, 2020, was extended to December 2021. As of February 2022, 48 out of 73 eligible countries participated in the initiative. Regrettably, only one private creditor participated,” Ugolor said.
Jason Braganza said there has been very little movement to further reform the debt architecture, adding that factors such as market behaviour, credit rating agencies, arbitration and mediation mechanism further allow the systematic indebtedness of vulnerable countries in Africa.
He said: “All the major debt relief initiatives from HIPC to DSSI to G20 Common Framework have restrictive and regressive conditions attached to them. High risk of austerity, cutbacks in social spending such as on education, social protection, increases in taxes e.g., VAT, fuel. All of these are justified in the name of creating fiscal space, but is this really the transformative challenge afflicting our continent?” he asked, adding that the rules were set by the perpetrators of the problems.
Sadiq Okoh highlighted the danger of physical and transition risks of climate change in Nigeria. He listed the effects of physical risks to include $2.6 trillion loss during the 2012 flooding in Nigeria, and reduction in crop yield due to climate change. He added that 45 percent of the Nigerian population lack access to water.
The experts suggested that Nigeria’s debt should include the key dimensions such as contingent liabilities as well as Ways and Means while adhering to the debt ceiling. They added that the country should promote blended types of investments that will ensure plenty of jobs are created. They also called for a new debt movement while efforts should be made to stop the bleeding of Africa through the blocking of looted financial resources from leaving the continent.
