Given the scenario above which reflects the Nigerian situation, there is bound to be an impression that debt is not such a good thing. But can debt be good? Surely, debt can be good, particularly if it is used as earlier stated to buy infrastructure. Unfortunately, debt has been bad in Nigeria owing to the manner it is incurred and expended.
Stemming from profligacy of some of our leaders, Nigeria has had the unenviable record of incurring debt and not applying it productively such as in development of infrastructure, hence in 1999 when former President Olusegun Obasanjo took over the reins of government, he embarked on what was that time referred to as economic diplomacy seeking debt write-off that resulted in the World Bank and IMF debt forgiveness of about $12bn of Nigeria’s total debt stock which was valued at about $30bn.
Despite the cleaning up the nation’s balance sheet through the World Bank and Paris Club substantial debt write-off negotiated by Obasanjo regime, at inception of the present administration, the team appointed to take stock of assets and liabilities from the Goodluck Jonathan administration reported that Nigeria’s total debt stock was in the region of N6 trillion-N9 trillion but Jonathan’s team quickly responded by pointing out that the deficit was accumulated over the years by successive governments.
The bickering between the Buhari and Jonathan regimes (which needs to be toned down to avoid collateral damage) emanated from the fear that debt is bad, but consider countries like the USA which is currently running her economy on a deficit of about $13 trillion. According to the US Republican Party presidential hopeful, Rand Paul, “The last time the USA was debt-free was 1835.” This means that for past 180 years, the USA government has owed the private sector and the good news is that the economy has done well and Americans have prospered in that period.
Similar to the USA, British government also has been in debt for more than three centuries, including the period of the Industrial Revolution that transformed the world from agrarian to industry-based economy.
Although the USA is the richest country in the world, as soon as a child is born there, he or she automatically becomes a debtor based on USA financial system which is credit-driven. As some would argue mischievously, when USA’s $13 trillion debt is spread amongst her estimated 250 million citizens, each person would owe more than an average Nigerian when her purported debt of about N9 trillion is shared amongst her 170 million citizens.
Obviously, the average Nigerian’s notion that debt is bad is shaped by the sad experience of the debt trap that erstwhile Nigerian leaders plunged the country into due to massive corruption in both the public and private sectors of the economy. It needs to be pointed out that the contrast between a third world or emerging economy like Nigeria which lacks capacity to sustain repayment of her debts and the US with a robust economy and ability to service her debt is that while the US is a $17trn economy, Nigeria’s economy only recently grew to half-a-trillion dollars. The size of US economy is assessed and valued by the sheer number of gigantic infrastructures like air and seaports, bridges, roads, corporate and residential properties as well as other sundry intangible assets which justify the ascribed size of the economy as the largest in the world. Contrarily, Nigeria’s potentially large economy which is hampered by severe infrastructure deficit reflected in her current valuation at $513bn. The size of Nigeria’s economy which could have been bigger only doubled from less than $300bn to its current size after a 2014 re-basement exercise which elevated it to the prime position of the largest in Africa.
Unlike the robust infrastructures in the US which have been facilitating increased productivity that economists believe enables every dollar to generate at least additional 40 cents, Nigerian economy is hobbled by endemic corruption as debts incurred to build bridges, dams, electricity grids and fertilizer plants that could have improved productivity were diverted into private pockets. The Siemens, Halliburton and a host of other internationally proven financial malfeasance established against some Nigerian leaders for corruption in contract administration come to mind.
As history is fond of repeating itself, a combination of forces beyond the control of Nigeria has conspired once again to bring the economy to a bind. Following the current cash crunch as a consequence of the global crash in crude oil price, the tendency for Nigerian authorities to resort to austerity measures as former President Shehu Shagari did in the early 1980s under similar circumstance of international crude oil price slump is very likely. In the course of preparing late President Umar Yar’Adua’s policy documents which later culminated into his Seven Point Agenda before his formal declaration to run for the office of the president of Nigeria in 2007, I had the privilege of chatting with him to determine his economic philosophy. He told me that in Katsina State where he governed for eight years, he made sure that the funds for a project were in the treasury before embarking on it. I quickly remarked that little wonder there were no significant infrastructural landmarks in Katsina because it would be difficult if not impossible to save up enough funds that would be adequate to construct huge hospitals or magnificent airports before embarking on the exercise. When I suddenly realized that I was addressing a serving governor and potential president of Nigeria, I quickly rebuked myself, but the late Yar’Adua who is an epitome of humility assured me that he was not offended by my comment. The point here is that economists are trained to think big and have fantastic ideas while accountants are tutored to be frugal and bring economists’ fantastic ideas down to reality. And for optimum performance, our leaders should have a knack or tendencies for being both economists and accountants.
Of course, the late President Yar’Adua who initiated the highly successful and game-changing Amnesty Programme in the Niger Delta was neither an economist nor an accountant, but presidents, governors or local government chairmen must have grandiose ideas for impactful projects for the economies in the sphere of their influence to grow; for jobs to be created for their citizens and to enable the populace prosper. That’s the surest way, I think, that growth in GDP can translate into prosperity for the masses and invariably stop Aliko Dangote from further lamentation as he did to the UN scribe.
Magnus Onyibe
