Debt And Governance Dilemma (2024)

In the complex dance of governance and fiscal responsibility, debt plays a central role, often wielding significant influence over a state’s ability to meet its obligations and foster sustainable development. Kaduna State, under the leadership of Governor Uba Sani, has recently found itself embroiled in a contentious debate surrounding its debt burden and its implications for governance. The governor’s assertion that his predecessor, Nasiru El-Rufai, left behind a staggering debt of “$587 million, N85 billion, and 115 contractual liabilities” has sparked discussions about the intersection of debt management and effective governance.

It is crucial to acknowledge from the outset that public debt, when utilized strategically and prudently, can serve as a catalyst for progress. Investments in critical infrastructure, education, healthcare, and socio-economic development often necessitate borrowing, especially for states with limited internal revenue generation. However, the key lies not in the mere accumulation of debt but in its responsible acquisition, utilisation, and management.

Economically speaking, debt can be a double-edged sword. On one edge, it provides the financial leverage necessary to fund projects that stimulate economic growth, create employment opportunities, and improve citizens’ quality of life. On the other edge, unchecked debt accumulation or inefficient debt management can lead to a host of challenges that undermine governance and jeopardise the well-being of the populace.

One of the primary ways in which debt can inhibit effective governance is by constraining financial flexibility and diverting resources away from essential services. When a significant portion of the state’s budget is allocated to servicing debt obligations, there is less room for critical expenditures such as healthcare, education, infrastructure maintenance, and social welfare programs. This can create a dilemma for policymakers, forcing them to prioritise debt repayment over pressing societal needs, thereby potentially eroding public trust and satisfaction with government performance.

Furthermore, high levels of debt can contribute to macroeconomic instability, particularly if the borrowed funds are not efficiently utilised to generate sustainable returns. Excessive debt servicing costs can strain the state’s budget, leading to budget deficits, inflationary pressures, currency devaluation, and reduced investor confidence. These macroeconomic challenges, in turn, can hinder economic growth, job creation, and overall prosperity, exacerbating social inequalities and contributing to political unrest.

In the case of Kaduna State, Governor Uba Sani faces the formidable task of navigating the delicate balance between addressing the legacy debt burden inherited from his predecessor and implementing effective governance policies that prioritise the needs of the populace. While the debt should not serve as an excuse for poor governance, it is essential to recognise the constraints it imposes and develop a strategic approach to debt management.

First and foremost, transparency and accountability must be central tenets of debt management practices. The governor should ensure that the process of acquiring and utilising debt is transparent, with clear mechanisms for public oversight and scrutiny. Detailed disclosures regarding the purpose of borrowing, terms and conditions of loans, repayment schedules, and utilisation of borrowed funds should be readily accessible to citizens and stakeholders.

Moreover, debt sustainability assessments should be conducted regularly to evaluate the state’s capacity to service its obligations without compromising essential services or resorting to unsustainable fiscal measures. These assessments should take into account factors such as revenue projections, expenditure commitments, debt-to-GDP ratios, debt service ratios, and external economic conditions. Based on these evaluations, the governor can make informed decisions regarding the optimal level and structure of debt for financing development projects.

In tandem with prudent debt management, Governor Uba Sani must prioritise fiscal discipline and efficiency in government spending. This entails streamlining expenditures, enhancing revenue mobilisation efforts, reducing wastage and corruption, improving budgetary planning and execution, and fostering a culture of accountability and responsibility among public officials. By enhancing fiscal discipline, the state can minimise the need for excessive borrowing and ensure that borrowed funds are maximally utilized for productive purposes.

Furthermore, the governor should explore alternative sources of financing and investment to diversify the state’s revenue base and reduce reliance on debt. This may include leveraging public-private partnerships (PPPs), attracting foreign direct investment (FDI), promoting innovation and entrepreneurship, optimising natural resource utilisation, and exploring creative financing mechanisms such as green bonds or impact investments. Diversifying revenue streams can enhance fiscal resilience, mitigate risks associated with debt dependency, and unlock new avenues for sustainable development.

Additionally, Governor Uba Sani should prioritise economic reforms aimed at enhancing competitiveness, productivity, and inclusive growth. This includes investing in human capital development, upgrading infrastructure and technology, improving the business environment, supporting small and medium enterprises (SMEs), promoting agricultural modernisation, and fostering regional integration and trade partnerships. By fostering a conducive environment for economic dynamism and innovation, the state can generate organic revenue streams, attract investments, create jobs, and reduce reliance on debt financing.

Importantly, the governor must engage in constructive dialogue and collaboration with key stakeholders, including civil society organisations, the private sector, development partners, academia, and the general public. Involving diverse perspectives and expertise can enrich decision-making processes, enhance policy effectiveness, build consensus around reform initiatives, and strengthen social cohesion and trust in government institutions.

Ultimately, the debt and governance dilemma in Kaduna State requires a holistic and multifaceted approach that balances the imperative of responsible debt management with the imperatives of effective governance, economic development, and social progress. Governor Uba Sani must navigate these complexities with foresight, integrity, and a steadfast commitment to the well-being and prosperity of the people of Kaduna State. By fostering transparency, accountability, fiscal discipline, economic diversification, and inclusive growth, the governor can steer the state towards a path of sustainable development and resilience, notwithstanding the challenges posed by inherited debt burdens.