Proposed $30b loan and Buhari’s many burdens
One of the image deficits President Muhammadu Buhari’s-led ruling All Progressives Congress (APC) will carry over into the year 2020 is the proposed $30 billion loan.
The planned loan is already generating sharp reactions from prominent Nigerians whose fears centre on how the country will survive another debt burden if this is added to the humongous debt profile the country is currently servicing put at about $27 billion. With this new loan proposal, Nigeria’s debt profile would have risen to almost $50 billion.
This is apart from the recent embarrassment the government encountered over the controversial arrest and detention of the convener of #RevolutionNow protest, Mr. Omowole Sowore, inside the premises of a court and the illegal detention of former National Security Adviser (NSA), Col. Sambo Dasuki despite several courts ordering his release. The government was forced to rescind itself by releasing Sowore and Dasuki amidst serious criticisms from within and outside the country.
What is rather creating tension concerning the planned loan is the fear that such money may not be put to positive use, especially since government has not been able to give detailed and convincing explanations on how previous loans and proceeds it claims to have recovered from corruption since it assumed power in 2015 were deployed for the benefit of Nigerians.
Apart from having failed to fulfill most of the electoral promises it made to Nigerians when it ousted the former President Dr. Goodluck Jonathan and the Peoples Democratic Party (PDP) in 2015, the Buhari administration is yet to tackle the economic challenges confronting Nigeria wile not being able and to fight corruption. Another image crisis the Buhari government will strive to manage as 2020 comes knocking is its perceived disregard for the rule of law in the area of human rights management, financial discipline, relationship with other arms of government (the legislature and the judiciary), and upholding of federal character principle in appointments, among others.
After the first four years and barely eight months into his second term, not many reasonable and patriotic members of the ruling party can beat their chests that the government has done anything crucial to douse the chronic poverty situation among Nigerians but rather things are getting worse with no sign they will get better.
While some optimists, however, say the loan is necessary and will eventually resolve most of the infrastructural problems across the country, pessimists believe the loan will further plunge Nigeria into more economic woes and poverty just like a third group are of the opinion that the way Nigeria’s economy is currently structured “the government cannot but obtain loan to address some critical issues whether it likes or not.”
One of the best known and unrepentant critics of Buhari’s government, former President Olusegun Obasanjo, has expressed deep concern about Nigeria’s rising debt profile and warned the Federal Government against “impending bankruptcy.” Obasanjo raised the alarm that Nigeria’s external debt grew by as much as 700 per cent to N24.947 trillion ($81.2.74 billion), from $10.32 billion in just four years (2015), meaning that the country would have to commit half of its foreign earnings to servicing its current level of indebtedness. He said such a situation only suggests impending bankruptcy, noting, “No entity can survive while devoting 50 per cent of its revenue to debt servicing.”
He explained that the current budget out of which Nigeria spends 25 per cent to service debt “is not the country’s total earning; a lot of it is also borrowing. Simply put, we are borrowing to service what we have borrowed and yet we are borrowing more.”
Just recently, former Vice President, Alhaji Atiku Abubakar, opposition PDP, the International Monetary Fund (IMF), and the Manufacturers Association of Nigeria (MAN) have also raised the alarm over the country’s rising debt profile, following Buhari’s request for Senate approval to borrow almost $30billion for development purposes. Abubakar said the administration has taken more loans in the last three years than Nigeria did in the 30-year period preceding 2016.
The Group Executive Officer of Confederated Facilities Ltd, Mr. Lai Omotola, said the present government and any other one coming after it would have no choice than to obtain loans because of the way the Nigerian economy is structured. Although Omotola shared similar opinions about the implications of mounting debts, he said it would only amount to lips service and mere politicking if anybody criticises the government over the planned $30 billion loans.
According to him, “The way the Nigerian government is now structured, there is no other option for anybody in power other than to go borrowing. The nation’s economy has been so arranged and also pushed to the wall that the only option available is for them to borrow due to so many pressing needs.”
He said the government’s pressing needs included recurrent expenditure and servicing of the budget.
“They understand that when it comes to recurrent expenditure if there is fuel scarcity there will be trouble in the country,” Omotola said. “If they do not pay workers salary there will be a crisis in the country. If they cannot pay debts on time it is a problem. All these things are not negotiable. Now, capital expenditure can still be negotiated. You can tell the contractor to go to the site and work and pay him as when-able. Because of these pressing needs the government, over the four years, has pushed itself to a corner. If anybody comes and proposed any economic solution within this short time other than to borrow, such a person cannot get it right. So, anybody that comes into government today has to borrow as the only option left. And this is a result of what they have created in the past. And borrowing these monies is further pushing Nigeria into a crisis situation because what that means is that our debt-servicing figure is going to increase. Now we are using 30 per cent of our income to service debts.
“But how serious is this government? It sets up an Economic Advisory Committee; the worry is, have we seen any impact? Has the committee even come up with a direction or proposed any rescue mission? The committee is just there, imaginary, in terms of name and position but in terms of impact, to critical thinking and radical approach for the survival of the country, it is not there.”
Omotola urged the Buhari government to be on its toes to work geniuses in Harvard University will not be able to proffer solutions to its economic challenges.
Citing instances of Buhari’s promises to fix the nation’s economy under a specified period of time during his campaign in 2015, the businessman said, “President Buhari is going to finish his tenure. When the incumbent was campaigning he made a lot of promises. Until when he got into office and he started telling us that he never knew the economy had deteriorated so much. Another person is also outside there now campaigning to get into power after Buhari, but the issue is, what can they do? If any politician says there is an alternative to borrowing, the person is just deceiving himself because he is not yet there; that is why he is saying. If he gets into power he will have no choice than to borrow. That is the truth.”
Reacting to the suggestion by Atiku that such a loan could be sourced locally, especially through NNPC, Omotola said, “It is good to say that on paper, but NNPC is a major appendage of government and so does not enjoy independence. Such a suggestion cannot work in the present situation. What Atiku is saying is mere theory and politics and not reality. The problem with NNPC is bigger than that of Nigeria.”
While suggesting a way out, Omotola said, “It is not a short run because the problem didn’t happen in one day. For every nation that has approached the level Nigeria is and has also come out of it draws out a 20-year master plan that remains unchanged. The plan is to resolve this kind of issue. For instance, we have China, India and the rest, but when we have policy inconsistency and political exigencies and ethnic agenda nothing concrete can happen.”
However, Chairman, Senate Committee on Finance, Mr. Olamilekan Adeola, defended the proposed loan, saying it was a necessary step to catalyse development. He dismissed fears being raised about the loan as unnecessary as the facility was needed to promote the economy.
According to him, “The loan is necessary to fund many ambitious on-going projects across the country, which would impact greatly on the economy and lives of Nigerians when completed. It is not one of those frivolous loans; this is a loan that is tied to projects. It is needed to fund landmark and ambitious projects such as the Lagos-Ibadan Expressway, the East-West Road, the Second Niger Bridge among others.”
Meanwhile, a socio-economic group, Yoruba Ronu told The Guardian that it is not averse to the loan only if it would be used for the purposes intended and properly supervised. The group said the need for such a loan could not be overemphasised due to infrastructural neglect over the years. The group’s president, Mr. Akin Malaolu, said there is a need to improve on the country’s general infrastructure that had suffered years of neglect with the consequence of unemployment.
“An example is the railway density that had long been made epileptic despite its huge advantage as the highest employer of labour,” Malaolu said. “The cost of increasing railway density within the country cannot be borne by the government alone due to slow and low returns on investment in that sector. It takes over 30 years of loan repayment. The need for such a loan is important.
“Also, the desire to transport our mined products from our mineral deposit sites across the nation would need railways to take the products from one destination to another. The huge unemployment can only be stemmed if our growth moves with comforting speed.”
Meanwhile figures from the Debt Management Office, which coordinates the management of Nigeria’s public debt that includes domestic, external and subnational debt, as well as bonds, treasury bills, and other tools, show that at the end of March 2015 – two months before Buhari took office on 29 May – the country owed a total of N12 trillion. At the end of June 2015, this debt had risen slightly to N12.1 trillion. This was US$63.8 billion at the official exchange rate at the time – N196.95 to the dollar.
By the end of June 2018, total public debt had almost doubled to N22.4 trillion. The debt office said the latest increase comprised of a US$2.5 billion Eurobond issued by the government in February 2018. This took Nigeria’s total debt to US$73.2 billion, using the Central Bank of Nigeria’s 2018 exchange rate of N305 to the dollar.
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