The Buhari government is notorious for binge borrowing and does it with so much impunity, throwing this generation, and indeed, the future generation, into bottomless debt. Binge borrowing has been on in the last five years, amid so much poverty, and this country has very little to show for it.
This government cares less about wise counsels in this direction. That was why it recently railroaded our kick and follow Senate into approving a mind-boggling $22.7 billion 2016-2018 external borrowing plan, which the president said would be used for critical projects across the country. The House of Representatives is yet to take a decision on it. I won’t be surprised if it follows the Senate to approve the loan request. The two institutions are dominated by stooges of the federal government; people who care less about the Nigerians that sent them there.
This was the same loan request rejected by the 8th Senate because it was absolutely ridiculous. Nigeria will soon be imprisoned by China, with over 70 per cent of the loans coming from the Exim Bank of China, while the remaining funds will come from the World Bank, Africa Development Bank among others. The Chinese have their neo-colonial plans well-laid out but this government is too blind to see it. They will give us a loan, solely decide how much the project will cost and their contractors will handle the projects. They solely fix the bills and pass it to us. We don’t have a say in anything other than to repay the loan. This is the level my beloved Nigeria has degenerated into.
The International Monetary Fund (IMF) persistently warns Nigeria and other third world countries that mounting debt to China is dangerous. It stresses that Chinese creditors create some instability or vulnerabilities. Those managing our economy must spend quality time reading the IMF caution.
There is a lot wrong with taking foreign loans to fund projects that should be private sector-driven as shown by the document that accompanied Buhari’s $22.7 billion loan request. Now, let’s take a critical look at some of the 35 projects listed. The phase 2 of the Abuja mass rail transit project will gulp $1.25 billion; the Lagos-Kano railway modernisation project/coastal railway project will gulp $5.53billion; the Calabar-Port Harcourt-Onne deep sea port will gulp $3.47 billion; Mambila hydro-electric power project will gulp $4.8 billion; the Nigeria Electricity Transmission and Access Project will gulp $364 million and NTA’s digitisation project will gulp $500 million.
In this modern era, a responsible government has no business with virtually all the projects listed. Any government in a modern economy ensures that projects like these are driven by the private sector. A judicious government would have worked on a BOT (Build, Operate and Transfer) with local and international companies to actualise these projects. It is embarrassing that after privatising the power sector, this government is planning to spend almost $6 billion foreign loan on electricity projects. I also find it shocking that public hospitals and schools are not listed to benefit from these loans.
Only few items on the list submitted deserve foreign loans. Here, I am talking about the nationwide emergency road rehabilitation and maintenance, the National Social Safety Net Project, the Multi-sectoral Crises Recovery Programme for the north-east and the Integrated Social Protection, Basic Health, Education, Nutrition Services and Livelihood Restoration Project, also for the North-east. Every other thing on the list is balderdash.
This government thinks only about accumulating debt and not about the repayment implications. The N2.45 trillion set aside for debt servicing in the 2020 federal budget is more than the N2.14 trillion for the entire capital expenditure in the budget, yet, the country is sinking deeper into debt. Aggregate revenue available to fund the phony 2020 federal budget is projected at N8.155 trillion and N2.45 trillion of this expected revenue will be used for debt servicing in 2020. This is almost 30 per cent of target revenue. It is just one of the numerous shenanigans contained in our dear country’s budget 2020.
There was a report in 2018 that the Buhari government was spending 69 per cent of its revenue on servicing both local and international debts. I thought government officials would come out to dispute this figure when the former Vice-President (Africa) of the World Bank, Mrs. Oby Ezekwesili unveiled it. It did not happen. The following year, in the 2019 budget, over N2.1 trillion was set aside for debt servicing. No country can attain development with this kind of arrangement. With Buhari government’s binge borrowing, in few years, Nigeria may be plunged into insolvency by the huge repayment commitments.
Our country’s revenue to debt repayment ratio is evidently horrendous. Agents of this government dubiously harp on debt to GDP ratio, instead of the lucid debt to revenue standard. Ezekwesili’s remarks on this, back in 2018, are instructive. She said: “The Federal Government is digging in instead of digging out. Already, the debt service to revenue is so high. Today it is 69 per cent. 69 per cent of revenue is used to service our debts. That is not a sustainable situation. I see the government quote all the time `Debt to GDP ratio’, but that is like a blunt instrument in an environment where your GDP is not reflective of your productivity. We measure your productivity by the revenue the GDP generates in the form of revenue of government that comes as a result of the GDP. Your debt to GDP is three per cent and you think that gives you the legroom to borrow and borrow. No, that is not your instrument. Your instrument is your debt service tool, which is the revenue.”
I can clearly remember the then Chairman, Senate Committee on Debts, Shehu Sani, remarking that if Nigeria must borrow, it must borrow responsibly. He added: “If we must bequeath to the future generation a pile of debt, it must be justified with commensurate infrastructural proof of the value of the debt. The payment plan of this debt will undoubtedly last the length of our lifetimes and possibly beyond. We must leave behind a legacy that will appease and answer the questions the next generation of Nigerians will ask.”
The words of wisdom of the Secretary-General of the Commonwealth, Patricia Scotland, on binge borrowing, would also be useful to the managers of Nigeria’s economy. She stated: “In a country where fiscal regulation is weak, debt may be accumulated in ways that are not transparent, and very seriously to the detriment of its citizens… with interest rates at historically low levels, borrowing becomes an attractive proposition yet heightens the concomitant risk of debt ballooning to levels which are not sustainable over the longer term. This situation raises the possibility that countries which have ‘borrowed their way out of trouble’ following a setback will eventually face very severe debt distress.”
Indeed, the burden of these loans on our star-crossed generation and indeed future generation is weighty. The way the federal government celebrate these loans often leaves me crestfallen. They create the impression that it would be a quick fix for all our problems. Unfortunately, it does not often turn out that way. What hapless Nigerians have been gaining from these massive borrowings is poverty, hunger, disease, malnutrition, unemployment and infrastructure decay.
These loans are not good for the health of Nigeria. The Buhari government must explore innovative ways of increasing revenue and using its limited resources only in those areas with massive impact on development, instead of accumulating more debt. Taking a loan to develop an institution like NTA and the railways is irresponsible. Government should create an enabling environment for the private sector to handle these. Spending money on already privatised power sector is also reckless.
Our Finance Minister, Zainab Ahmed, did not unequivocally say that the Buhari government was dumping the quest for the $22.7 billion as reported by a section of the media early in the week. I have reviewed her remarks and she only stated that “current market indices do not support any external borrowings at the moment, despite that the parliament is still doing its work on the borrowing plan.”
The minister added: “One arm of the parliament has completed its work, and the other arm is still working. So, it is a process controlled entirely by the parliament itself. We are waiting. The expenditures that are not critical must be deferred to a later date when things become more normal. Several national plans, programmes and projects have been directed at diversifying the production and revenue structures of the economy.”
I sincerely hope that the economists around our President will learn and act on incisive analysis by patriots, before binge borrowing cripples this country. The $22.7 billion loan pursuit must be dumped. Nigeria’s public debt profile stands at N26.215 trillion as at September 2019. The federal government, which accounts for over 90 per cent of this debt profile, has been very careless. The Buhari administration is evidently looking good for the unenviable record of being the most notorious for binge borrowing in the 59 years’ history of this country.
The $4m Legal Fee from ECA
Some of the payments made by the Buhari government for some comical services often leave me wondering whether the interest of the public is paramount. The latest of such puzzling expenditures is the $4 million paid to an unknown lawyer from the Excess Crude Account (ECA) for God knows what.
Precisely 14 days ago, the Senate asked the Accountant General of the Federation, Ahmed Idris, to supply details of the lawyer who was paid the $4 million from the already depleted excess crude account, and the nature of the job done. Ahmed is still struggling to come up with this information. I guess the reason for the depletion in the ECA is now obvious.
The ECA, an escrow account set up by the federal government, into which the difference between the budget benchmark price of crude oil and the actual sale price thereof in the world market is paid, is now in a mess. The money in this account is used to serve as buffer in the event of fluctuation in oil price or reduction in supply to the international market. Unfortunately, this is now impossible. Nigeria currently has $71.8 million in the ECA, down from the $2.2 billion which the Buhari administration inherited from the Jonathan administration in 2015. The money in the ECA, rose to $2.6 billion in 2016, but went down to $2.4 billion in 2017. The money was further depleted in 2018 to $631.4 million; $324.9 million in 2019 and reduced drastically to $71.8 million in 2020.
Now, crude oil price has fallen far below Nigeria’s 2020 budget benchmark price of $57 per barrel, no thanks to Coronavirus. Economic crisis looms as crude oil price continues to slide. The ECA that should help us at this period has been badly depleted. The exhaustion of the ECA has made Nigeria more vulnerable.
The ECA, created by the Obasanjo government in 2004, rose from $5.1 billion in 2005 to more than $20 billion in November 2008. The depletion of the account has been unending since 2009. This means that the Yar’Adua and Jonathan government are also guilty of plundering the ECA. The Obasanjo government saved for the rainy day while others depleted the savings. Now, the ECA that should serve as our buffer while oil price is tumbling is gone. The storm is already gathering. Tougher times are around the corner.
Credit: Yemi Adebowale, Thisday