Economist 'Tope Fasua has responded to former President Olusegun Obasanjo's recent comments on Nigeria's debt, arguing that debt can be a tool for growth and development. Fasua contends that countries that have achieved greatness have done so by leveraging their cash flows to borrow and invest in their economies. He cites the Western world's engagement with Africa, particularly China's recent investments in infrastructure projects, as examples of how debt can be used to drive growth.
Fasua's response is a rebuttal to Obasanjo's vehement opposition to Nigeria's debt, which Fasua believes is rooted in politics rather than economics. He argues that the current economic landscape is different from the past and that countries must adapt to new challenges. Fasua had previously written an article charging that the world has underinvested in Africa and that Nigeria is not over-borrowed. He maintains that proper treasury management, including leveraging resources and cash flows, is essential for economic growth.
The concept of national debt is not new, with rulers in ancient Mesopotamia and the Roman world borrowing money for wars and public works. In medieval Europe, royal debts were tracked using tally sticks, while the Dutch Republic revolutionized state borrowing by issuing long-term public bonds to citizens. The history of the British national debt dates back to the reign of William III, who engaged a syndicate of City traders and merchants to offer an issue of government debt, which evolved into the Bank of England.
The Bank of England, established in 1694, formalized the framework for national debt, turning it into a permanent, tradable financial instrument. Throughout the 18th and 19th centuries, major conflicts, such as the Napoleonic Wars and the American Revolutionary War, drove debt to historic heights. British debt-to-GDP surpassed 200 percent following the Napoleonic Wars, while US and British debt-to-GDP ratios peaked around or above 240 percent–250 percent by the end of World War II in 1945.
Fasua argues that nations borrow for projects, with wars being a primary driver of debt in the past. He notes that post-colonial nations like Nigeria never had the opportunity to secure the loyalty and commitment of the monied class behind their societies or nations through borrowing. Instead, Nigeria was introduced to borrowing through global structures and foreign banks. Fasua believes that borrowing is essential in today's economy, as it allows countries to leverage their resources and cash flows for growth.
The debate on Nigeria's debt highlights the need for a nuanced understanding of the role of debt in economic development. While some argue that debt can be a recipe for disaster, others believe that it can be a tool for growth and development. Fasua's response to Obasanjo's comments underscores the importance of considering the complexities of debt and its potential impact on Nigeria's economy.
As Nigeria continues to navigate its economic challenges, the conversation on debt and its role in economic development is likely to continue. The government's ability to manage its debt and leverage its resources and cash flows will be crucial in driving economic growth and development. With the right approach, Nigeria can harness the potential of debt to build a stronger economy and improve the lives of its citizens.
Key points
- Economist 'Tope Fasua argues that debt can be a tool for growth and development, citing examples of countries that have leveraged their cash flows to borrow and invest in their economies.
