On Tuesday last week, President Muhammadu Buhari wrote a letter to the National Assembly requesting for approval to borrow $29.96 billion from foreign lenders over the next three years. The request, which he said is part of the government’s External Borrowing Plan, is meant to address infrastructure deficit in the country and is to be […]
On Tuesday last week, President Muhammadu Buhari wrote a letter to the National Assembly requesting for approval to borrow $29.96 billion from foreign lenders over the next three years. The request, which he said is part of the government’s External Borrowing Plan, is meant to address infrastructure deficit in the country and is to be spent on power, rail, roads, education, health and water projects.
According to the president’s letter, the money is made up of projects and programmes’ loan of $11.274 billion; Special National Infrastructure projects of $10.686 billion; Euro Bonds of $4.5 billion and Federal Government Budget Support of $3.5 billion. He said, “Considering the huge infrastructure deficit currently being experienced in the country and the enormous financial resources required to fill the gap in the face of dwindling resources and the inability of our annual budgetary provisions to bridge the infrastructure deficit, it has become necessary to resort to prudent external borrowing to bridge the financing gap.”
This indication that Nigeria will once again go a-borrowing from Shylock foreign lenders caused jitters and consternation all over the country. No Nigerian will forget in a hurry that at the beginning of this Fourth Republic, foreign loans [and the huge chunk of national revenue used to service them annually] had become such a burden that former President Obasanjo spent a great deal of time travelling abroad and also mobilising other Third World leaders to campaign for debt relief. We never got the hoped for relief from creditors but the Obasanjo administration used revenues from oil windfall to exit from London and Paris Cub debts in 2005. We paid a lump sum $18 billion to exit from $32 billion in debt. It was said at the time that what this country borrowed since the 1970s was about $18 billion and having repaid over $30 billion, we still owed $32 billion!
It was a very painful national experience and we should not be in a hurry to return to that situation. There is some understanding for the current government’s position because many economists say we must borrow in order to finance our way out of the current, debilitating economic recession. The Revenue Mobilisation, Allocation and Fiscal Commission, for example, welcomed the borrowing plan. Its acting Chairman Shettima Umar Abba Gana said government did the right thing because Nigeria has one of the lowest debt to GDP ratios on the African continent, about 14 percent. What he did not add was that twelve years ago we were committing up to 45 percent of government’s annual revenue to debt service and we only achieved the current low debt to GDP ratio by very painfully giving away $18 billion to creditors in one fell swoop.
Where will these mega loans come from and what will they be used for? Minister of Finance Mrs Kemi Adeosun said last Thursday that it will be borrowed within the next three years from the World Bank, African Development Bank, Japan International Co-operation Agency, Islamic Development Bank [IDB] and China EximBank. Details provided in a statement by her Special Adviser Festus Akanbi said Federal Government will take $25.8 billion while states will borrow $4.1 billion. He said $18.3 billion dollars will be spent on infrastructure, with $14.6 billion going to federal projects while $3.7 billion will go to state projects.
According to the statement, projects billed to benefit from the loans include Mambilla Hydro Electric Power Project, $4.8 billion; Abuja Mass Rail Transit project phase two, $1.6 billion; completion of the Railway Modernisation Coastal Project from Calabar to Port Harcourt to Onne Deep Sea Port, $3.5 billion; Lagos-Kano Railway Modernisation project, $2.4 billion; Lagos-Ibadan segment, $1.3 billion; Kano-Kaduna segment, $1.1 billion; acquisition of Euro bonds, $4.5 billion; while $3.5 billion dollars will be dedicated to “Federal Government budget support.”
That last item sounds suspiciously like recurrent spending, something that all economists have warned the government not to resort to foreign borrowing in order to satisfy greedy and wasteful recurrent spending. As for the capital projects outlined in the minister’s statement, we agree that they sound like critical and well thought out priority national capital projects. If these projects were to be activated and realised, they will propel the economy to grow out of recession and they will also lay a solid foundation for economic diversification and sustainable growth.
That is, if the loans are judiciously utilised. This is a capital IF. There is a saying that the road to hell is paved with good intentions. Most of the money borrowed by Federal and state governments over a 40 year period to finance what looked on paper like good infrastructural, economic and social projects ended up being squandered on the altar of bureaucratic corruption, inefficiency and waste. The Nigerian people were left holding the hat. Despite the Buhari administration’s anti-corruption campaign, there is as yet no sign that this country’s public service has acquired the selfless, patriotic, efficient and incorruptible disposition to judiciously apply mega foreign loans into worthy projects that could repay the loans and develop the country, hence the need for the utmost caution in this matter.
It was not too long ago that an administration in this country reportedly spent $16 billion on power projects, only for the late President Umaru Yar’adua to mildly say that “it was without commensurate results.” If that money had come from foreign loans, current and future generations of Nigerians will still be repaying it, for no power at all. We urge President Muhammadu Buhari to think very carefully on this matter. If this country plunges again into another round of Debt Trap, it will be a terrible legacy to leave behind.
