$30 billion loan: Is the Buhari government in love with high debt profile?

APART from the controversial Hate Speech Bill which is eliciting public anger for the Senate, one other issue pending before it that is making Nigerians agitated is the presidential request for legislative approval for a $30 billion loan. In a letter from President Muhammadu Buhari, read on the floor of the Red Chamber by President of the Senate, Ahmad Lawan, on December 3, the executive arm of government sought legislative approval for the fresh external borrowing.The letter tagged, ‘Request for the National Assembly to Reconsider and Approve the Federal Government’s 2016-2018 external borrowing plan,’ President Buhari recalled that he was merely resubmitting a similar request sent to the eighth National Assembly for their approval which was shut down under the leadership of Senator Bukola Saraki and Yakubu Dogara, immediate past Senate president and speaker of the House of Representatives, respectively. The loan, Buhari said, was meant to finance key infrastructural projects across the country.

The letter read: “Pursuant to Section 21 and 27 of the Debt Management Office [DMO] (Establishment) 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. Specifically, the Senate is invited to note that: While I had 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, four states’ projects and one China Exim Bank Assisted Railway Modernisation Projects for Lagos – Ibadan segment were approved, out of a total of 39 projects.

“The 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.

“These outstanding projects are well advanced in terms of their preparation, consistent with the 2016 Debt Sustainability Analysis undertaken by the Debt Management Office and were approved by the Federal Executive Council (FEC) in August 2016 under the 2016 – 2018 External Borrowing Plan.

“Accordingly, I have attached for your kind consideration relevant information from the Honourable Minister of Finance, Budget and National Planning, the specific outstanding projects under the 2016 – 2018 External Borrowing Plan for which legislative approval is currently 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.”

For a nation trapped with a mind-boggling external debt of about $81.27 billion (N24.947 trillion) as of March 2019, according to the DMO, and a commitment of about a quarter of its projected earnings in 2020 Budget to servicing of local and foreign debt, President Buhari’s request was received with mixed feelings by the lawmakers across the party divides. While presenting his 2020 Budget estimate of N10.330 trillion (later increased to N10.594 billion by the Appropriation Committees of both chambers) to a joint session of the National Assembly, President Buhari said his administration would spend N2.5 trillion to service debts. Checks revealed that to shore up national revenue, he equally presented the Nigeria Tax Law ( Amendment Bill) called the Finance Bill 2019 alongside the 2020 Appropriation Bill in his October 8 presentation. The seven bills that were since amended included the Petroleum Profit Tax, Custom and Excise Tariff Act, Company Income Tax Act, Personal Income Tax Act, Value Added Tax, Stamp Duties Act and Capital Gain Tax.

An adamant Senate?

With the projected robust earnings expected from crude oil earnings after the amendment of the production contract sharing agreement with international oil companies and the huge revenue estimate from amendment of the Nigeria Tax Law (Amendment Bill) which is expected to increase the Value Added Tax (VAT) from five per cent to 7.5 per cent, among others, majority of the senators were of the opinion that the fresh request for loan was needless. The President of the Senate had spoken the minds of his colleagues last November at a two-day public hearing on the 2020 Budget organised by the National Assembly, as he cautioned against borrowing to fund infrastructure provision. He further advocated a Public Private Partnership (PPP) option to save the country from heavy indebtedness.

He said: “We cannot continue to borrow to build our infrastructure. I belong to that school of thought that believes that where we can have a PPP to build our infrastructure, we should do that. I feel that if we can build our road from Abuja to Kaduna or Kano with private funds and they design a way to collect their money, let us do that. Other countries have done that and it worked. As long as we are not shortchanged, we have to look at it. If we have to borrow, we should borrow, but where there is another opportunity, we should explore that.”

Further findings revealed that in his remarks after the passage of the Finance Bill, shortly after the presentation and consideration of the report of the Senator Solomon Adeola-led Senate Committee, an elated president of the Senate said the amendment was meant to generate revenue to fund the 2020 Budget.

He said: “We amended seven acts largely to ensure that we streamline the tax system in Nigeria and ensure that we get revenues for government to provide services and infrastructure to the citizens of this country. What we have done is very significant because this is to ensure that we not only have sources of funding, but also credible and reliable sources of funding for the 2020 Appropriation. This is also for subsequent activities of government. The revenue generating agencies will have to sit up. The National Assembly, particularly the Senate, will be mounting a lot of oversight pressure. If they have targets, we must ensure they meet the targets. I believe what we have done is not to put taxes or burden on the ordinary people. What we have done is to create more revenue.”

A sudden volte face

But even as the Senate was yet to open discussion on the fresh loan request from President Buhari, Senator  Lawan said the Senate would approve the loan request. He made the commitment last Monday at a media session. He said the present administration needed money to finance public infrastructure and there was dearth of fund. He also noted that unlike the request presented to the eighth National Assembly led by Senator Saraki and Dogara, without adequate information for the legislature on the projects the loan was meant to finance, President Buhari had provided the ninth assembly with all needed information.

Lawan said: “The question of whether [or not] 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, 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 so well to ensure that such funds are properly, prudently, economically and transparently applied to 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. I want to inform this gathering and, indeed, Nigerians that the letter conveying the loan request of the executive came with every possible detail and, in fact, we will ensure that we are getting the right information from the executive arm of government. So, the situation is not the same. In 2016, there were no submissions of details. This time, I think the executive has learnt its lesson and the letter came with sufficient details.”

Lawan’s pliable Senate?

Barely 24 hours after the president of the Senate gave his words that the loan request would be given legislative approval, the Senate, on resumption from plenary on Tuesday referred President Buhari’s 2016-2018 external borrowing plan request to its Committee on Local and Foreign Debts, led by Senator Clifford Ordia. The president’s request was forwarded to the committee for further legislative work following its presentation by the Senate Leader, Yahaya Abdullahi, during plenary.

The Senate has since proceeded on break for the festive season. It is to resume next January.

A senator of the Peoples Democratic Party (PDP) who craved not to be named expressed disappointment over the remarks attributed to the president of the Senate on the loan request when the chamber was yet to subject it to debate. He accused Senator Lawan of always genuflecting to please President Buhari, an attitude he noted had courted for the Red Chamber the derisive label of ‘a rubber-stamp Senate.’

He said: “Even though I wasn’t at the event, I read the news report. When he was asked the question on the controversial bill of hate speech  sponsored by Sabi Abdullahi, he said Nigerians would decide its fate at a public hearing. I expected him to be circumspect on the loan request as well. The president of the Senate is first among equals. We have 109 senators in the chamber. Their opinions matter as well. He shouldn’t have said we would approve just like that. Only him can’t give legislative approval.”

The way forward

Those who argued that Nigerians have enough sources of revenue to fund its budget are being vindicated against the backdrop of startling revelations of leakages in revenue generating agencies. In the last two weeks, the Senate has decried non-remittance by the Central Bank of Nigeria (CBN) and the Petroleum Products Pricing Regulatory Agency (PPPRA). The Senate penultimate Tuesday mandated its Committee on Finance to investigate the non-remittance of over N20 trillion into the Federation Account by the CBN. The amount, according to the Senate, was collected as stamp duties from banks and other financial institutions in the country but not remitted. The decision to probe the non-remittance of stamp duties was reached sequel to a motion, “The Need to Improve Internally Generated Revenue (IGR) of the Federal Government of Nigeria Through Non-Oil Revenue,” sponsored by senator representing Ondo Central, Ayo Akinyelure.

Senator Akinyelure said that the Central Bank had, in January 2016, issued a circular directing all banks and financial institutions to charge stamp duty of N50 on lodgments into current accounts against revenue projections by the Federal Government of N2.5 trillion annually. He noted that after the issuance of the said circular by the apex bank, all deposit money banks and financial institutions effected N50 per eligible transaction in accordance with the provisions of the Stamp Duty Act 2004 and Federal Government Financial Regulations 2009. He expressed concern that the apex bank had consistently rebuffed efforts by the Federal Government to recover over N20 trillion from Nigeria Inter-Bank Settlement Systems (NIBBS) to the Federation Account. He further declared that spirited efforts by House of Representatives and National Economic Council, last May, to wade into the issue and ensure recovery of the fund yielded no meaningful result.

He said: “The Central Bank of Nigeria and NIBBS have technically refused to comply with the presidential directives for the recovery of over N20 trillion revenue into the coffers of government. The CBN and NIBSS deliberately failed to cooperate and comply with the directives of the president for the realisation of over N20 trillion revenue due from stamp duties collected from 2013 to 2016 and subsequently, over N5 trillion minimum revenue due to be collected annually to the Federation Account to be shared among states of the federation for infrastructural and economic development.”

He further lamented that since the implementation of the collection of stamp duties, “accountability by banks has not been transparent and no report by the CBN or its subsidiary, NIBSS, to the Nigerian public to know the actual revenue generated, collected and transferred to the Federation Account.”

In similar vein, the Senate also discovered that the PPPRA had allegedly failed to remit over N800 billion to the Federal Roads Maintenance Agency (FERMA) for the maintenance of roads across the country. The startling revelation came on the heels of debate on a bill for an Act to Repeal the Federal Roads Maintenance Agency Act, 2002 and to Establish the Federal Roads Authority Bill, 2019, sponsored by Senator Henry Basset. While commenting on the alleged non-remittance of the N800 billion by the PPPRA, president of the Senate said the chamber would get to the root of the alleged non-remittance of funds and that it was determined to live up to public expectations in its oversight functions.

He said: “I believe that we need to demand what happened to over N800 billion that PPPRA was alleged to have collected. I think that we will take that as a separate issue because we need to verify and confirm, even for the sake of allowing PPPRA to defend itself, because this is not something that we can sweep under the carpet. N800 billion can do a lot of things for our country.”

It is believed that amendment of the Nigerian Tax Law and the Production Sharing Contract meant to generate enough revenue to fund the nation’s budget would not achieve the ultimate target if the Senate is not diligent in its oversight functions.