ebt has now become a measure of progress and a source of joy for the Nigerian government. Since Kemi Adeosun, the erstwhile first Minister of Finance under the late President Muhammadu Buhari, declared that Nigeria would have to borrow its way out of poverty, borrowing and poverty have been growing in the same direction. Despite complaints that the Nigerian debt burden has multiplied under this government, in which the legislature has been complicit, the Federal Government’s appetite for debt accumulation continues to be strengthened. And, we all watch as the future of our children, our country, is being mortgaged by debt-crazy governments.
Last week, the government floated Euro bonds or Euro loans, a foreign-denominated credit, to push us further into a debt trap. While the preparation for that loan was ongoing, the President hinted that the government would need to borrow over N1tn in the domestic market to implement the 2025 budget. For the remaining two months of the year? Every month, federal government bonds in billions of naira are sold to the public, just as treasury bills are sold monthly. Both are credits to the government. Just in December 2024, Nigeria issued US$1.7bn Eurobond, which was oversubscribed. SUKUK bonds, another local loan, are sold from time to time to raise funds.
When the Buhari government was borrowing, it did not prepare the ground for continuous sources of such borrowing, and it got to a point where external borrowing dried up. He resorted to massive borrowing from the Central Bank of Nigeria, which primarily caused inflation. The Tinubu government seems to understand the requirements for external loans better. When the government started growing the external reserves and emphasising or showcasing positive statistics on the economy, I knew they were working towards building confidence in international market watchers or participants who would invariably buy into their loan demands. That is what has just happened with the latest Eurobond issue.
So, when they launched a $2.35bn Eurobond, I was not surprised, and when it was reported as oversubscribed by about 400 per cent, I was also not surprised. The final subscription was US$13bn! It is the biggest oversubscription ever achieved by Nigeria. The oversubscription is not based on confidence in the economy, as the government is rejoicing, but on the above-average interest rates of the bonds and the present global high liquidity. The bonds’ interest rates are 9.625 per cent per year for the 6.5-year bond and 10.375 per cent for the 10-year bond. The average lending rates in advanced economies where the bond was launched are around six per cent. Also is the fact that such bonds have a small per value or face value and can be easily bought and sold in the international market should make it attractive naturally. Since it is issued across many countries, exchange rate variability is a major risk of the bond, particularly for the issuer with a non-tradeable currency.
Before a country comes up with borrowing, it would have made estimates of the needs. When there is oversubscription, the excess would be used for new or unanticipated developments that require funding or kept as reserves. It should also prevent a return to the market very soon, and that is even after accountability on the use of the original subscription has been provided. Our government owes us no explanation. What was the 2024 bond, and its excess used for that requires going back to the market in less than one year?
Since no one questions the government on borrowing and no one cares about its usage, the likelihood that this government will go back to the international credit market in about six months is very high. This compounds the underdevelopment trajectory and deepens the poverty level of the country. It is time to protest to protect Nigeria from perpetual underdevelopment, while those who are working hard to put us into the mess are still around.
How much personal debt do they contract or acquire before becoming rich?
We are told that they borrow for infrastructure, and we have been rebuilding infrastructure in the last three decades, without an end in sight. Many times, when I see a signpost of a Sukuk bond by the roadside introducing what the bond was used for, I wonder if the road was awarded to a tailor or a civil engineer. One then wonders how much of the raised fund was expended on the repair?
Debt has now become the middle name of Nigeria. We have resources generating funds in both local and foreign currencies, and they are being stolen. The domestic funds are shared by the people in government through recurrent expenditure, and the country goes back to borrow the stolen money in the form of domestic debts, from the politicians and government officials or generally, looters, at high interest rates. Who are those subscribing to monthly government bonds or Sukuk bonds in millions? The ones stolen and kept abroad by them become our external debts, also at high interest rates. The poor people are born to serve the insatiable appetite of the rich!
Confidence in an economy is better demonstrated by attracting direct and portfolio investments, as both types of investments bring in funds that can create employment, raise domestic output, and increase incomes. That is what our economy needs, not borrowing that can subject us to dependency and ridicule. The borrowed funds do not get to the borrower’s country, particularly for developing countries. The fund is often used to purchase machines, vehicles, arms, and other imported property, thereby generating employment in the countries supplying the items as well as enriching the banks that facilitate the transfer of funds. Eventually, the debtor country loses out on both sides. Only Nigerians can put a stop to this borrowing mania. Do not expect President Trump to come and fight on your behalf because this also benefits his country.
Sheriffdeen Tella @ThePUNCH
