The lure of other people’s money
The lure of other people’s money is irresistible. It hardly comes as a surprise that state governors are falling over themselves to get their hands on other people’s money – and increasing the domestic and external debt burden on the nation. The Debt Management Office, DMO, released details last week showing that within six months […]
The lure of other people’s money is irresistible. It hardly comes as a surprise that state governors are falling over themselves to get their hands on other people’s money – and increasing the domestic and external debt burden on the nation.
The Debt Management Office, DMO, released details last week showing that within six months of their assuming office, 13 of the new state governors borrowed a total of N226.8 billion from domestic and external lenders. Sixteen other states ramped up their debts too. We are back on the path to Golgotha. We began the trek along that path in December 2016 when former President Buhari asked the senate to permit him to borrow $30 billion from the World Bank. He wanted to use the money to put our ailing infrastructures out of their misery.
The jumbo loan opened the flood gates for federal and state governments. By the year 2020, the easy resort to loans had become a source of worry. At a public hearing on the 2020 budget on October 24, the senate president, Ahmad Lawan, advised the government to wean itself from “continued reliance on borrowing to fund the infrastructure needs of the country.” His advice was not taken.
At the end of his eight years in office, Buhari left N71 trillion Naira debts. The last time someone checked, the Tinubu administration had followed his path and taken the national debts to more than N90 trillion. It is getting heavier and heavier.
There is nothing particularly wrong with loans because all governments borrow money to take care of their various businesses. The problem, therefore, is not borrowing per se because no government has enough money to meet all its financial commitments. All of them borrow. In an inter-dependent world, no nation can go it alone. The countries that have are morally obliged to help countries that do not have.
Taking other people’s money is sweet but it creates its own fundamental problems for the economies of countries that borrow. The easy resort to loans does not qualify as competent management of the national or sub-national economy. It, in fact, distorts the management of the national economy. The IMF and the World Bank try to police external loans to ensure that such loans are put to good use by the debtor countries. The IMF insists that countries that wish to borrow from it must meet some stringent conditions for securing the loan. Those conditions known as conditionalities managed to acquire a bad name because third world countries chafe at meeting them.
Loans leave their dirty marks on borrowers. Borrowing dangles the temptation of an easy option for governments. Other people’s money saves governments the headache of having to think of alternative sources of keeping the treasury in a good financial shape. Borrowing is a chop-now-pay-later option. It provides only a temporary financial relief but postpones the evil day when the lender comes knocking at the door.
We heard that knock for many years before the Obasanjo administration succeeded in persuading the Paris Club to forgive a large chunk of our debts owed to its members for many years. It was a great relief to the country and the managers of the national economy. Nigeria cannot afford to go that way again. Let us pull back now from piling up the debts and avert serious social and financial crises in the near future.
In the 2020 budget proposal, the capital vote was a piddling N2.14 trillion. But the government committed N2.5 trillion of the budget to repaying part of our debts. It is called debt servicing in technical terms. A quick calculation tells you that it was one-quarter of the entire budget. See why it would be unwise to plunge the country into another loan jamboree?
The then minister of finance, budget and national planning, Mrs Zainab Ahmed, appeared at the public hearing on 2020 budget October 24 and told the members of the national assembly that Nigeria has a “revenue crisis and not debt crises.” She did not think Nigeria had over borrowed because “the total borrowing rate of the country was under 50 per cent of the GDP.” She was trying to allay our mounting fears that the debt burden was not crushing the country. It was.
But she admitted at the IMF/World Bank meeting in the US that the country was finding it difficult to service its debts. It could not service its debts because not enough money was flowing into the national treasury. How does a country service its loans if it is faced with an existential threat like a revenue crisis? Perhaps, all that was in the recent past. But it casts a long shadow on the present problems associated with managing the national economy.
The new managers of our national economy must give some very serious thoughts to the management of the national economy. I recall that when the then President Obasanjo saw the state governors falling over themselves to secure external loans, he stopped them. His action brought some sanity into the system. His order has since been tossed on the dust bin of our national history. The flood gates opened by Buhari remain open. The state governors salivate over other people’s money. They are all going for it. This is how some of the stand on external loans in the release by DMO: Ebonyi incurred external debt of $37.54 million; Kaduna, $17.69 million; Kano, $6.6 million; Plateau, $831.008 million; Sokoto, $499.472 million; Zamfara, 655.653 million and Niger, $1.27 million.
The president would do well to staunch this haemorrhage now because it can only get worse if the governors are not stopped. Nations do not develop with loans. They develop with the skilful management of their internal resources. The removal of fuel subsidy gives the states and local governments more money from the national treasury. Let them learn to manage that.