It is said that local and external debts are not altogether bad in themselves except they are used to fund unproductive investment or productive ventures that are not managed efficiently. Unfortunately, for a country as Nigeria, the exception is the case.
Statistics show that Nigeria’s wanton hunt for debt finance has finally led the country into the booby trap of intergenerational inequity and default national insecurity. This means that each past generation, by their continuous unbridled borrowing to finance their current consumption expenditures, have transferred the heavy debt burdens on this emerging generation, especially debts which this generation did not benefit from.
Consequently, monies that ought to be used to finance the expanded social development needs of this emerging generation in terms of education, healthcare, energy and transport infrastructure are now being used to service the debt owed to local and external lenders, and the remaining used to service the profligate lifestyles of the political elite. Thus, a generation has now emerged that is undereducated, underserved with basic infrastructure and lacking in life skills to survive in modern civil society.
The multidimensional poverty of today’s youth population and staggering rates of youth unemployment readily predisposes this emerging generation to various sociopathic behaviours such as banditry, drug abuse, religious terrorism, armed robbery, cultism, internet fraud, to mention a few.
For instance, the unemployment rate has continued to rise yearly from 5.1% in 2011 to 23.1 per cent in 2019. This means about 16 million young people are unemployed, while 11.5 million working-age persons are underemployed. Worse still, the National Bureau of Statistics projects a 33.5 per cent unemployment by 2020.
This means two things: The emerging generation is not employable due to their very low levels of formal education and modern-day working skills or due to more frequent midlife health crisis than it was with the outgoing generation. The second is that even when those that are ably qualified and healthy seek employment, either by sourcing financial resources for entrepreneurial work or supporting existing businesses, there is little or no credits or job vacancies for them.
Yet Nigeria’s political scoundrels are still not relenting in taking more debts. In the past five years alone, Nigeria has borrowed N20,389.9 billion from foreign and local sources. Currently, Nigeria owes USD66.7 billion in foreign debt and N20,425.8 billion as local debts. These make a total of N44,571.2 billion at the current exchange rate of N362 to USD on 27th January 2020.
A 35-year analysis of Nigeria’s national debt and its relationship with economic growth has revealed that Nigeria’s debts have a negative effect on economic growth. These researchers submitted that this is highly due to the use of debts obtained for unnecessary and unproductive uses. These recent studies on Nigeria’s growing debt stock reveal that the country is tending towards another case of debt overhang. This is a situation where a country’s debt stock grows so much to the point that it can only lead to greater unemployment and lower economic growth, by default.
Interestingly, according to these studies, analysis of debt finance in the short term showed positive results towards economic growth. This is due to the fact that most of these debts are used to finance recurrent expenditure such as salaries, allowances, maintenance costs and other short term investment expenditure. As people hold more cash, in the interim, their aggregate demand increases, which leads to an increase in investment and greater output.
However, in the long run, debt finance neither reduced unemployment nor did it lead to an increase in the national output. This gives more weight to the worries that the outgoing generation is the only one benefitting from these growing debt stocks at the expense of this emerging generation.
The inference drawn from these researches for the long run is that there will be growing numbers of unemployed people, fewer opportunities for people to assess credit to starts new businesses, higher risks of business failures due to inefficiencies in Government’s investment in infrastructures like Electricity, Transportation. Even if real growth rate increases, other socioeconomic indices such as health, education, unemployment and access to financial service will reveal that the economy is not at full employment. The consequent distressing human condition contributes significantly to the current high crime rate and insecurity woes of the country.
This was aptly captured in the 2019 Human Development Index (HDI) rating which ranked Nigeria 158 out of 189 countries with a value of 0.534. With its main emphasis on people and their capabilities as criteria for development, the HDI ranks countries on three components: life expectancy, education, and per capita income.
Life expectancy in the country was put at 54.3 and expected years of school 9.7. It means a Nigerian born in 2019 may not live more than five and a half decades with only just ten years’ education, mostly low quality. This poor health and education and social welfare indicators are proofs to why Nigeria currently ranks tops among the poorest places in the world, with over 96 million of its 200 million population living in poverty.
To resolve this seeming intractable problem of insecurity around the country, Government needs to revisit intentional investment in the development of its citizenry and not in just a select few friends and relatives. The federal and state governments must reverse their policies of securing loans to offset short term liabilities, reduce corruption and inordinate spending of hard-earned revenues, and apply themselves to the best macroeconomic practices around the world.