Taiye Odewale takes a look at the rising debt profile of Nigeria has generated sundry reactions as it affects the NASS.
Historical antecedents
Development in terms of critical infrastructures like stable electricity , good road network , functional rail transportation , well staffed and equipped Schools and Hospitals , standardized Sea and Airports , technologically driven security network anchored on robust intelligence gathering, facilitated by inter agency collaboration etc, is the basic yardstick of differentiation between developed countries and developing or underdeveloped ones .
While the above highlighted indices of development are practical features of developed countries like the Great Britain, United States of America ( USA) , France , Germany, Canada , Russia, Australia , United Arab Emirates ( UAE) etc , they are not so in developing or underdeveloped countries , like Niger, Chad, Mali , Burundi , Congo , Gambia , Senegal and to a very large extent, Nigeria despite her enormous potentials in human and natural resources .
More worrisome is the fact that yearly budgetary allocations is far insignificant for a country like Nigeria to address her huge infrastructural deficits across the various Sectors, hence the need for her to seek for funding outside yearly budgetary estimates , in form of external borrowings or loans to fund the capital component of the budget meant for addressing such infrastructural needs .
Using the N10.594trillion 2020 budget as example, while N560, 470, 827, 235billion is appropriated for statutory transfers , N4.842trillion for recurrent expenditure, only the paltry sum of N2, 465trillion is earmarked and appropriated for capital expenditure which is about 23% of the entire budgetary provisions .
This is even as N2.725 trillion is appropriated for Debt servicing and N2.28trillion for fiscal deficit, meaning that out of the N10.594trillion projected , only the N560.470billion appropriated for statutory transfers and N4.842trillion earmarked for recurrent expenditure , will enjoy 100% cash backing or implementation since N2.28trillion is deficit to be borrowed and N2.2725trillion to be used as debt servicing, provided that the projected
N8.155 trillion revenue is realised 100%, which is not usually so on yearly basis, due to series of factors like revenue leakages or better put, corruption being battled by the government .
Efforts of the present administration
Little wonder that Nigeria particularly under the present administration, aside the yearly budgetary projections , makes proposals for long term external borrowing plans to fix the required critical infrastructures that can bring about required transformation of the country from grossly underdeveloped one to developing and a developed one in the nearest future .
One of such external borrowing plans President Muhammadu Buhari is seeking approval for in executing 39 critical infrastructural projects across the country , is the $29.96billion contained in the 2016-2018 External Borrowing Plans and represented to the 9th National Assembly in November last year , having earlier been rejected by the 8th National Assembly in 2016.
President Buhari in the letter of request said : “Pursuant to Sections 21 and 27 of the Debt Management Office (Establishment Etc.) Act, I hereby request for resolutions of the Senate to approve the Federal Government’s 2016-2018 External Borrowing Plan as well as relevant projects under this plan.
“While I have transmitted the 2016-2018 external borrowing plan to the eighth National Assembly in September 2016, this plan was not approved in its entirety by the legislature.
“Only the Federal Government’s emergency projects for the North East’s four states projects and one China Assisted Railway Modernization Projects for Lagos-Ibadan segment were approved out of the total of 39 projects.
“That outstanding projects in the plan that were not approved by the legislature are nevertheless, critical to the delivery of the government’s policies and programmes relating to power, mining, roads, agriculture, health, water and educational sectors.
“Sustainability analysis undertaken by the Debt Management Office (DMO) , were approved by the Federal Executive Council in August 2016 under the 2016-2018 external borrowing plan.
“Accordingly, I have attached for your kind consideration, relevant information from the Minister of Finance, the specific outstanding projects under the 2016-2018 external borrowing plan for which legislative approval is currently being sought.
“I have also directed the Minister to make herself available to provide any additional information or clarification which you may require to facilitate prompt approval of the outstanding projects under this plan”.
Economic experts kick
But as laudable as the intension may be, economic experts are kicking against the request on the grounds that it will worsening our debt profile and by extension, turn Nigeria to a hugely indebted Nation which she was , before October 2005, when the Paris Club wrote off $18billion out of $30billion ( 60%) of the total debts she owed her various creditors .
According to them, if the loan is approved by the 9th National Assembly, Nigeria’s total debt portfolio will increase to about $97billion ( about N30trillion) even though argument on the part of government has always been that Nigeria’s debt to GDP ratio remains low.
Specifically, chairman, Senate committee on local and foreign debt in the 8th Assembly, Senator Shehu Sani, in a statement issued in November last year said the proposal by the federal government will constitute a perpetual debt trap for Africa’s most populous nation. He recalled the reasons why he and his colleagues at the Senate then turned down the request to borrow such humongous amount of money.
In a statement titled: “Why We Rejected the $30billion Loan Request from the FG”, Sani noted: “We turned down the FG loan request for $30 billion to save Nigeria from sinking into the dark gully of a perpetual debt trap. We don’t want our country to be recolonised by creditor banks.”
Also a Lagos-based economist, Mr. Marcel Okeke, expressed concern that the request by President Buhari was ill-timed , saying ‘’It is really a cause for worry that at a time the International Monetary Fund ( IMF) , is warning Nigeria about its burgeoning external debts profile, the Federal Government is pushing to borrow more.
According to Okeke, a huge chunk of Nigeria’s annual national budget at the moment is going into debt servicing; with the external debt standing at about $22billion as at June 2019, an additional borrowing of $30billion will bring total external debt to about $52 billion.
The economist, who was once chief financial analyst at Zenith Bank,
however added that ‘’Unless the new ‘Finance Act’ on which the funding of the 2020 budget is predicated, provides the required magic of additional revenues inflow for the government , Nigeria could irreversibly be going into a dangerous debt trap.’’
But in allaying the fears of antagonists of the loans , President Buhari had at different fora , assured Nigerians that the loans if approved and granted , will not be mismanaged in anyway .
According to him, one of the positive signs of progress in the economy was Nigeria’s place on the recent ranking on the World Bank’s 2020 Doing Business Index, in which the country moved up 15 places from the 2018 position of 146 to 131.
Specifically , President Buhari in his speech at the 18th edition of the National Productivity Merit Award investiture ceremony held in Abuja on Thursday, 28th November , 2019 said : ” Our economic diversification programmes are yielding positive results. Our ease of doing business policies and programmes are already impacting micro, small and medium enterprises as well as manufacturing, mining and agriculture, among other key sectors. We are now ranked 131 on the World Bank’s 2020 Doing Business Index by moving up 15 places from the 2018 position of 146.
“We have made outstanding progress in almost all segments of the agriculture value chain; consequently, tens of thousands of jobs in agriculture, logistics, manufacturing and real sectors are being created.
“These policies can best be well sustained with provision of required infrastructures across the various Sectors as encapsulated in our budgetary provisions and borrowing plans “.
Apparently convinced with the Presidential submissions and intensions as far as the yet to be approved external borrowing plans are concerned , the President of the Senate , Ahmad Ibrahim Lawan on Monday , December 16, 2019 , at a media briefing in Abuja declared that the Senate and by extension, the National Assembly will approve the loan.
Lawan who made the declaration in response to a question from one of the journalists at the session said : ” On the question of whether we will pass the loan request of the Executive arm of Government, yes, we will pass it. If we don’t have money and you have projects to build, then how will you provide infrastructure that you need?
“But one thing is that, we are going to be critical, that every cent that is borrowed is tied to a project. These are projects that will have spillover effects on the economy and we will undertake our oversight seriously to ensure that such funds are properly, prudently, economically and transparently applied on those projects.
“In 2016, the Senate did not pass the loan request of the Executive at that time and the reason was because there were no sufficient details. This time, I think the Executive has learnt its lesson by ensuring that the letter
conveying the loan request came with required details of what and what the loans would be expended on .So, the situation is not the same”.
As a way of facilitating the required platform for all critical stakeholders to brainstorm and contribute to the debate on national debt, the National Institute for Legislative and Democratic Studies ( NILDS), is planning a public lecture this month for them to lay bare, the key issues, challenges and implications involved particularly as regards the rising public debt and explore lessons from developed and some developing countries.
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Unless the new ‘Finance Act’ on which the funding of the 2020 budget is predicated, provides the required magic of additional revenues inflow for the government , Nigeria could irreversibly be going into a dangerous debt trap.
