The Director-General, Debt Management Office, Dr. Abraham Nwankwo, in this interview with Okechukwu Nnodim, says economists should stop giving misleading interpretations of Nigeria’s debt profile
there’s been varied concerns by economists about Nigeria’s rising debt, what will you say about this?
When somebody makes a statement, there could be two ways to interpret it. You can interpret it from what we call denotative perspective, which is by what it denotes. You can also interpret it from the connotative. The denotative is what actually the fact is, but connotative is the emotional aspect. So when somebody says Nigeria’s debt is rising, it can be a statement of fact that the debt is rising, but the way it is being put is in the negative. Meaning that it is bad for it to rise.
The question I will ask you is: if somebody reports to you that your child in the boarding school, whom you have not seen for the past twelve months; is growing, is that bad news? You don’t want your child to grow? So that is why I said it had connotation and denotation. The connotation tends to project it as being negative if something is growing. But in Economics, you don’t talk most of the time of a variable in isolation; you relate one variable to another.
How are we to relate this issue to other economic variables?
You will say the debt is growing relative to the Gross Domestic Product, or the debt is growing relative to the revenue or the ability to service. You can’t simply say that the debt is growing. If you say so, you are deliberately misleading your audience and the unsuspecting public when you say the debt is growing. So anybody who does not necessary want to mislead the public, who wants to present the facts for serious objective discussion will say Nigeria’s debt is so much and Nigeria’s GDP is so much. And this means that the measure of Nigeria’s output is so much, so that you can relate the level of the debt to the capacity of the country to produce and its actual production.
That is why we talk Debt GDP ratio. So in Economics, don’t talk of variables in isolation, you relate one variable to another or even one variable to many others. That is the way to go. It’s just like in a company; you can’t come to a company and say that this manufacturing company has borrowed too much. You cannot say that, for you must first relate their borrowing to their equity and that is why accountants and financial experts talk about the leverage ratio. You must know the relationship between the company’s borrowed resources and its equity, because you can’t simply say the company’s debt is too much. If the company’s debt is growing and its equity is growing, then the ratio may even remain unchanged, which means nothing actually has changed in practical terms.
Are you saying experts should cross-check their facts before reacting to the nation’s rising debt profile?
That is why I tell you that every statements Nigerians make have a connotative and denotative meaning. We will encourage all Nigerians when they are making statements to always try to convey some meanings, realities, facts and figures, which other parties can use in business and intelligent discussions. So in practical terms, yes Nigeria’s debt, compared to what it was last year, is growing. But also Nigeria’s economy is growing. I challenge you to go and look up what was Nigeria’s GDP, either in nominal terms or in real terms, that is at constant prices. What is it five years ago and what is it today.
Then what was the debt five years ago and what is it today? What was the ratio of debt to GDP five years ago and what is it today. When you look at it, then you should be able to make up your mind and you should be able to know the true position of what is happening. There is no point listening to “somebody said,” because the facts and figures are there. You have all the statistics about the Nigerian economy published by the National Bureau of Statistics, the National Planning Commission and the Central Bank of Nigeria. You also have all the detailed data on Nigeria’s debt, both external and domestic published by the DMO.
All these organisations that I mentioned have functional websites. The Ministry of Finance, NBS, NPC, CBN and DMO, all have very functional websites. So when you have all these organisations with functional websites and you have all the array of data there, then you can adequately balance statements made by different people as regards the country’s rising debt. So the truth is that Nigeria’s debt is rising but it is sustainable. And it is sustainable because why the debt is increasing in measured rate, the country’s gross domestic product is also growing.
So will you say that this is a good thing for Nigeria?
It is a good thing for the country because if we need to build roads and we borrow money to build the roads, is it not a good thing? It is a good thing. If you need to build roads and you don’t have the resources now, and you expect that your future streams of income should be enough to pay the debt, why don’t you borrow the money today to build the road?
For instance, you see the very serious effort government is making to ensure that we have adequate and reliable power supply. No Nigerian will say that he is not seeing the impact. You have seen that the government has virtually come to the conclusion of privatising the power sector. The generating and distribution stations have been privatised, the transmission company has been put in the hands of a management consultant, Manitoba, and Nigerians are seeing it.
Now what is the implication? Using the transmission as an example, government has to put a lot of resources to make sure that the power that is being generated can be effectively transmitted and distributed. Therefore it has to make sure that the transmission network is strengthened and extended. Now for it to do that; it will need to look for resources and government is not going to take the money put in education and health for use in power. So what government will need to do, which is the reasonable thing to do by any responsible government, is to look for how to source the money from various sources, particularly from concessional sources, so that we can have a reliable transmission network and the power being generated will be effectively distributed and this will impact on the living standards of the people.
Remember that once the problem of power supply is significantly addressed, in the next two to three years, as government is now on the right path to achieving this, it is going to lead to establishment and revival of industries? Do you know the impact it’s going to have on small scale production? Do you know the impact it’s going to have on the economy, in terms of people being fully engaged and in terms of income generation and employment?
So, Nigerians should be looking at this structured pattern the government is following to transform the economy. We have to be positive instead of making spurious statements, while the international community is endorsing the process that we are making. For instance, JP Morgan recently endorsed the Nigerian bond market and encouraged foreign investors to participate. Barclays did the same and these are independent global analysts encouraging people to invest in the Nigerian bond market. So instead of people to find good things to propagate the greatness of the country, they are making statements to denigrate Nigeria. It is outsiders that are saying the government is doing a good job.
Therefore in summary, Nigeria’s debt is sustainable. Moreover, government has over the past four years taken additional initiatives to make it even more sustainable than it used to be. And this is in terms of being prudent, fiscal consolidation, reducing the fiscal deficit, reducing the amount borrowed domestically yearly as is seen in the annual budgets. If you look at the budgets, you will see the trend over the past three to four years, the amount borrowed from the domestic economy has reduced so as to leave more room for the private sector to borrow and to make sure that you don’t put an upward pressure on interest rates. So when you look at all these you will see that the government is doing all the right things in the economy including public debt management.
In terms of employment, government’s economic transformation drive has not been felt, what will you say about this?
You should think of it as immediate impact, medium-term impact and long-term impact. Immediate impact for employment, you don’t expect it to happen immediately. Yes, you are aware of what government is doing with SURE-P and the Young entrepreneurs programme. You should know the number of people that have been employed. Now these are symbols to show the commitment of government in employment generation.
But the big thing about employment generation is to transform the economy. And that is why government appreciates that the most important link for triggering market employment is to make sure there is power supply. That is why government has committed itself to breaking the jinx in power supply and all Nigerians can agree that that jinx has been broken. In the next couple of years, with the support of all and sundry, Nigerians will obviously see the massive economic impact in the country with respect to power generation.