Beware, the Spirit of Unoka

A fortnight agoPresident Buhari submitted a request to the Senate to approve an external loan of US$29.96 billion (N10.7 trillion). It’s the second time such a request would be presented, the first being in 2016, when the Senate rejected it. As a career banker, it would be rather rich of me to sit here and be sanctimonious about borrowing. I am experienced enough to know one of the axioms of finance, which says it is smart to use other people’s money to get rich. But you must know what you are doing.

Nigeria’s infrastructural financing needs are humongous. The African Development Bank estimates about US$100 billion as the amount needed annually to meet our financing gap in infrastructures. But I have my own ground rules. First, we must borrow strictly for infrastructures or other projects with a guaranteed return on investments. This obviously rules out borrowing for mere consumption. I am also opposed to the idea of borrowing for social or rehabilitation and reconstruction programmes. Under the great sage Chief Obafemi Awolowo, Nigeria did not borrow a dollar to finance both the war and the post-bellum reconstruction. Either we are imbeciles or we are possessed of the spirit of Unoka the lazy failure in Chinua Achebe’s Things Fall Apart, who would always borrow to feed himself and his family.

I would insist that Senate not give a blanket approval for US$30 billion to be spent just like that. All such borrowings must, in my considered opinion, be directly linked to specific, monitorable projects. I am not comfortable with the idea of such a staggering loan that government can proceed to spend as it deems fit. The record of this administration in terms of financial controls and accountable spending is not an impressive one.

Also, Nigerians demand to know what all the other borrowings have been used for. In a matter of five years our national debt has ballooned from US$10 billion to a whopping US$84.4 billion. And we do not have much to show for it. We know that money has been wisely spent when we see the president commissioning one infrastructure project or the other. Unfortunately, the few projects that have been commissioned so far are those that were begun by the previous administration of Goodluck Jonathan. So, I would be very wary of taking on more debt without the iron cast guardrails of financial discipline. The current administration seems to have an uncontrolled appetite for foreign loans. But it is not particularly good at managing projects. Without fiscal discipline, it is dangerous to borrow!

I am the first to know that there will always be a financing gap for the foreseeable years. We need more highways, speed trains, harbours and housing. We need more investments in urban development and attendant facilities. Some 50 percent of our people are condemned in the darkness of the Middle Ages, with no access whatsoever to electricity. And the other half have to contend with almost daily breakdowns of power supply. Our population doubles every 30 years. Today it has reached the 200 million mark. It is forecast to be a staggering 410 million by 2050, the third most populous in the world, ahead of the United States and only behind India and China. We have never done enough planning for such quantum leaps in demographics. And we have not modelled the demand for power and infrastructures to feed the needs of an exploding population. We should only borrow if we can marshal the necessary fiscal discipline and if we have learned to keep our home in order.

Whilst we do not yet have a debt crisis, the IMF and the World Bank have warned that we are already reaching a dangerous threshold, given that we spend 50 percent of our revenues just to service our debt while only a meagre 23 percent goes into capital spending. Incurring another US$30 billion will take our total debt outlay to about US$114 billion, which, under current path-dependencies, will mean we will be spending 70 percent of our revenues on debt-servicing.

Oil accounts for 50 percent of government revenues and 94 percent of its foreign earnings. Most OECD countries have already given orders to their automobile manufacturers to phase out oil-consuming cars in preference for electric ones. This will wipe out 70 percent of the market for oil in the coming decades. Our leaders have given no thought whatsoever to this impending doomsday scenario. If we continue to borrow in the expectation that we will continue to earn enough from oil to repay our debts we would be living in Unoka’s paradise.

Economics is, of course, the master science of alternatives — of scarcity and choice. We need a comprehensive programme of cost-saving and control of waste and financial hemorrhage in all aspects of the public service. Some statutory bodies such as NNPC, LNG and FIRS have not been releasing funds – estimated at trillions of naira — into the federation account as required by law. We must compel them to obey the law. We need to deepen macroeconomic and institutional reforms, including privatization. Through public-private-partnerships (PPPs) we can get foreign investors to invest in key sectors, for example in railways, power, ports and harbours. Such financing arrangements will lessen pressure on the treasury, therefore obviating the need to incur further loans. We must also boost the extractive capacity of the state. Nigeria is among the lowest in terms of tax-to-GDP ratio. Ours stands at 5 percent compared to South Africa’s 25.9 percent. Political theory also establishes that taxation is good for democracy. Only when civic public pay their taxes can they demand accountability from their leaders.

We could also declare an amnesty of 3 years for all the stolen wealth from Nigeria. It is estimated that Nigerians have squirrelled abroad more than US$200 billion of looted funds. Most of these will be lost forever unless we declare a moratorium to encourage their repatriation. If the culprits can bring back the funds and invest them in the country, no questions will be asked. However, after the moratorium has expired, we must pursue and hound them down until they cough out every dollar. It worked for Italy a few decades ago, and I don’t see why it wouldn’t work for us. As the Israeli Special Forces Sayeret Matkal would say, “He who dares, wins”!

Some of us were involved in the Paris Club debt negotiations during 2005/2006. At that time our external debt was about US$36 billion. We were spending US$5 billion annually on servicing interest alone. In the deal that we negotiated with the Paris Club, we paid back US$20 billion in order for the rest to be written off. I was acting for the Central Bank Governor at the time and I recall signing the cheque for the first tranche of US$7.5 billion. I caught fever immediately and had to have bed rest. I could not fathom coughing out such a staggering amount to pay off some greedy Shylocks in New York, London, Frankfurt, Paris and Tokyo. I felt the pain to the marrow of my bones.

Last week the international ratings agency Moody’s downgraded Nigeria’s status from stable to negative. It did so on account of our sluggish economic growth in the context of dwindling government revenue, increasing insecurity, geopolitical uncertainty and a worsening debt-to-GDP ratio and other macroeconomic fundamentals.The atmosphere looks truly bleak.  It seems evident that Nigerians have little on which to anchor their rational expectations.

I know what debt peonage is.The Western powers regretted bitterly having let us off the hook more than a decade ago. The debt settlement was a gust of fresh air which allowed our economy to bloom in subsequent years. Giving a blanket approval for a whopping 30 billion dollar fungible loan is the surest means of returning our country to economic serfdom.Those who love our country and cherish our economic freedom and sovereignty must not allow us to return to our vomitlike the proverbial dog.

It reminds me of Unoka, the quintessential failure and lay about in Achebe’s immortal novel:“In his day he (Unoka) was lazy and improvident and was quite incapable of thinking about tomorrow. If any money came his way, and it seldom did, he immediately bought gourds of palm-wine, called round his neighbors and made merry. He always said that whenever he saw a dead man’s mouth he saw the folly of not eating what one had in one’s lifetime. Unoka was, of course, a debtor, and he owed every neighbor some money, from a few cowries to quite substantial amounts….He was poor and his wife and children had barely enough to eat. People laughed at him because he was a loafer, and they swore never to lend him any more money because he never paid back. But Unoka was such a man that he always succeeded in borrowing more, and piling up his debts.”