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Debt And The Environment: Financing Ecocide -By Kehinde Oluwatosin Babatunde

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Introduction

In the distant past, debt was viewed as shameful by our puritan ancestors, over the years debt has become famous, the modern world couldn’t function without debt. Not holding debt should be a real cause for concern – it would mean that a nation or a firm has no valuable assets, that its signature is worthless. In the rarefied spheres of corporate or state power, lack of credit worthiness, not borrowing is the cardinal sin. Following the above prelude, one might ask why is there so much hue about Nigeria’s foreign debt especially when compared to other debtor Nations?  Following the recent submission of the Finance minister that Nigeria is mindful of its debt and its yet to reach its borrowing threshold, one might easily conclude that a debt position of $US 21million as at the 4th quarter of 2018 is not a big deal. The debt burden of Nigeria is often underestimated given our penchant to often align with metrics set by the world Bank and other multilateral organizations. The World Bank pegged the debt to GDP ratio to 52% hence we often don’t see the need to borrow less if we haven’t surpass this threshold however to rely on the debt to GDP metric is like enjoying a sleep via a sedative, one might not appreciate the realities of the debt position. The debt to revenue metric is a more appropriate metric to measure our debt burden and this is where the cookie often crumble as a report in November 2018 from the international monetary fund (IMF) claims that 50% of Nigeria’s revenue is used to service debt.

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Kehinde Oluwatosin Babatunde

Nigeria as the creditor’s dummy

Creditors don’t really care if sovereign borrowers ever pay off the loans. So long as bankers maintain confidence in a country’s ability to pay interest on its debt, they can afford to be magnanimous where principal is concerns. If countries aren’t paying their debt it means, among other things, that the money they borrowed has not been used productively. Debts should be used to generate new wealth, however we have seen  situations where there is an investment mismatch where short term funds are invested on capital infrastructures leading to a mismatch in maturity of the loans. We have also seen cases in Nigeria where we borrowed for engagements that do not have capacity to pay back, an instance is the One million dollars borrowed under the Peoples Democratic Party’s (PDP) administration to combat Boko Haram. 

A vestige of underdevelopment

Following a history of being consistently tagged as a Third World nation, the urgency of development is inspired on every successive leadership in Nigeria howbeit a rather opaque ideology to achieving these development goals. This quest for development often justify all manners of borrowings and wasteful spendings from third world governments. A great deal of costly infrastructure has already been purchased with borrowed money, on which interest must be paid. All the investment in our rail system, irrigation and transport were supposed to fan industrialization. But as external market for Nigeria’s major export- oil shrinks, the expensive infrastructure gradually becomes redundant and starts to function at a fraction of its real capacity. Meanwhile thanks to long neglect, the internal market is in no shape to take up the slack -salaries are low and many youths lack jobs, so there is a scant purchasing power to buoy up the economy, hence we pay foreign debts without a support system at home to fan growth. 

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Debt in financial terms 

Debts can be paid only by earning currency on international markets, and the most obvious way to remain competitive when one has a wholly extraverted economy is to keep wages low. Workers, unfortunately still insist on eating, at least the basic foodstuffs at prices commensurate with their earnings. As a growing population consumes more food or fuel, more difficult choices has to be made. If the Nigerian government pass on to the consumer the real cost of food or fuel in the form of high prices, workers will immediately demand higher wages. Higher wages, in turn will automatically mean even less ability to compete in already dwindling international market. The only solution is subsidy, add the subsidy to be paid on petrol and food to our debt service payment and you will not be surprised why we have underperformed economically and in our infrastructures.

Debt and the ecosystem

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Every activity of a nation including debt leaves a footprint. While other economic and financial implications of debts are easily noticed, the environmental implications are seldom spoken of. Indebted countries have not just borrowed money -they have mortgaged the future. Nature puts up the collateral. There are two debt/environment relationship. The first is borrowing to finance ecologically destructive projects, the second is paying for them and all the other elements of debt financed modernization by cashing in natural resources. Many of the grandiose projects that have taken Nigeria on the debt tread mill are environmental disasters in their own rights. The burden of servicing these debts imposes on the oil  companies the obligation to continue the exploration of crude oil in order to generate revenue for the government. In a United Nations report in 2017, it was reported that it would take over 30 years to reverse the damage the oil spillage has caused on the Niger Delta environments. The oil spillage depletes aquatic life. Climate change, habitat loss and pollution all contributes negatively to the environment. The relationship between a nation’s environment and its debt seem like separate issues at first glance, but debt and the environment are related, the more the developing countries stay in debt, the more they will feel the need to milk earth’s resources for the hard cash they can bring in. This is apparent from Nigeria’s massive deforestation which is stated to have increased at an annual rate of 3.5% per annum since 2005. This has overwhelmingly contributed to the trend of desertification. In a  study conducted from 1901 to 2005, it was observed that there was a temperature increase in Nigeria of 1.1°C while the global mean temperature increase was only 0.74°C, this is strongly connected to the massive deforestation and we are yet to even connect this bogeying statistics with the recent intense heat across the country. 

Conclusion

The contributions of huge foreign loans to environmental plunder, widespread impoverishment can no longer be denied. The earlier we start seeing the debts beyond its financial and economic implications the better for our environment.

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Kehinde Oluwatosin Babatunde is a prolific writer and public speaker based in Lagos Nigeria.

Email: Kehindeobabatunde@gmail.com

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