Recently rated the most productive researcher in Economics in the 2021 AD Scientific Index ranking of Economists, Professor Abayomi Adebayo, from Obafemi Awolowo University (OAU) Ile Ife, speaks to DARE ADEKANMBI on the $16billion loan approved from President Muhammadu Buhari by the Senate on Tuesday, pointing out the implications of accumulation of debt and suggesting solutions.
Were you surprised at the news that President Muhammadu Buhari has sent another loan request to the Senate, this time to the tune of a whopping $16billion, despite the country’s debt stock already standing at N42 trillion before the fresh request which has been approved?
I will say that in governance, there are different economic schools and parameters that are used to take decisions. When you look at the loans we have acquired over the years, we all know that they are not good for the progress of the country. One, it is not that borrowing is evil or bad. In Economics, borrowing is not problematic if you do your analysis properly. We can borrow to pursue infrastructural development and many things that can make for growth. In most cases, when you borrow and appropriately apply the borrowed funds, this will further generate the potential to pay back the loan and then move the country forward. The key problem about Nigeria is that our borrowing has not translated into physical economic impact on the various issues for which we have borrowed the money. We have borrowed on agriculture, yet we have not seen the physical landmark breakthrough that suggests such money has been borrowed over time. You know we started with the Ogun-Osun River Basin Authority and others which were financed through borrowing. By now, we should be talking about Nigeria being a real agrarian country given all those models. But many of the sectors in which a lot of borrowed money has been pumped, people just tell us a lot has been spent in such sectors. We can’t see the physical economic impact in such sectors. That is the worry because we are backward. We have a lot of deficit in infrastructure. We are producing virtually nothing. We borrowed to put Ajaokuta [Steel Company] together, but we got nothing out of it. What I am trying to show you is that our borrowing history does not show we have serious leadership across dispensation of administrations to suggest that if we borrow now, it will meet the need. That is the cry now. Of course, the quantity of amount we are owing now is a critical problem. It is high, given that we are weak in managing the economy; we are weak in understanding what we want to even spend on. To make matters worse, we are endemically corrupt as a country. Now, the problem with corruption is that you will have spent the borrowed money. It is so bad that 60 per cent of what has been spent is not spent really but goes to rent seeking and other things which Nigerians are buried inside and which we know how to do well. So, our borrowing, many times, does not end up really being applied to the purpose of the loan. A court has just passed a judgment on [AbdulRasheed] Maina and other people like that. When you hear about the quantity of money they meet in their accounts and the kind of properties they own, you begin to wonder what business they did to get what they have got. When you see things like this, you will know that a lot of resources from resource endowment angle and borrowing are not efficiently applied to bail the economy out. This is why Nigeria has become like a cursed place for the citizens. The citizens are voluntarily migrating to any country in the world because the leadership has decided to sit on the resources and decide what they want to do with it, rather than making the economy better. That is obvious. I don’t want to say much because anytime you are speaking seriously, some people will say you are attacking the leadership or even feel it is one party that sent you to abuse them. If we have people that can listen for once, we won’t have problems. Almost every country in the world borrows money and even the United States has debts. But these countries don’t abuse their own the way we do here.
The second issue you have to note is that many times, when you want to borrow, you must understand the conditions. We were given a loan when they wanted us to start the Structural Adjustment Programme (SAP) and we understood the conditions they gave us. We were so stupid that we did not understand that policies are so useless when we don’t improve an economy. You don’t deregulate to destroy. From that point, our productive capacity was completely destroyed. All the little manufacturing enterprises like Dunlop, Michelin and the textile industry died by it. With that disruption, we have been struggling till today to be able to get out of the mess.
This fresh loan, we just heard they are getting a loan. We don’t know the conditions that are there. There was a rumour sometime about Chinese loan and many other things like that. Conditions of loans are very important when you want to take them. When the conditions don’t matter and what matters is just for them to get money to spend, then there is a problem.
The last but not least on the issue of loan is that there is no way we can think a loan can do the best job than building our economy. Nobody gives you loan for free. The IMF, World Bank and others are in business. They will not give you loan. They will tell you it is development fund and they are trying to help us. But in reality, they are only helping themselves. They will even exercise the authority to begin to control our economy indirectly. You can be an independent country and still find yourself highly dependent. By our careless subscription to all kinds of loans, we have submitted Nigeria’s economy to external manipulations which have never been in our interest.
So, these are the issues. When people are in government, their goal is to want to solve some problems and leave the rest for whoever is coming, a kind of ‘let me do my own and leave the rest for others coming mentality.’ It is not a nationalistic feeling because anything you are doing now, you must think of the implications for the coming generations. These are serious issues. That they are borrowing is not the first or the second. The only think we export in Nigeria is raw material. We don’t think of manufacturing to get better benefits from those raw materials. We export these materials at the cheapest possible rates and begin to import things like fuel in this generation. When I was a young person in the 60s and the 70s, Nigeria was refining fuel and I knew what they called ordinary and super fuel. For several years, this was wiped away and governments after governments, not just this current government, have demonstrated incapacity to put Nigeria on a platform to produce at least fuel. If they had done this, they would have wiped away subsidy and all kinds of problems connected to the importation of fuel and the fraud there. People just look the other way and feel some people can’t be controlled and you wonder why they are governing if they can’t handle the country.
In the loan request that was approved by the Senate on Tuesday, there were no terms and conditions attached. After giving an approval, the Senate president asked the president to send the terms later. As a development economist, what do you make of this?
It does not make sense. If the lawmakers are representing all of us, before the approval, they should have looked at the conditions to see if they are favourable to the country. There is what we call checks and balances in government. We have three arms of government for this purpose. If people in the Executive don’t see certain things, the lawmakers can open their eyes to see those things. But if they have approved something without considering the conditions, are they going to disapprove that thing if the president eventually sends the conditions to them? This shows the country is being run by people who don’t understand the seriousness of the positions they occupy.
One readily cited justification by this government for its borrowing spree is that it will help bridge infrastructural gap as in the case of the rejuvenation of railway transportation in parts of the country. They also say they are borrowing to finance the deficit in the 2022 budget, but sadly about 80 per cent of the revenue generated is going into debt servicing. What does this mean for the future of the country?
What I want you to know is that in a debate, when you want to take a step, you look for all kinds of reasons to justify your action. Anybody that wants to take a step must first have a conviction on certain premise. They have told us that their premise for borrowing is to develop infrastructure. Nigeria borrowed to finance the construction of the Lagos-Ibadan Expressway when it was first constructed. I doubt if there is any major project that Nigeria ever did without borrowing, despite the huge endowment of natural resources in the country. Even the railway that we had before, borrowing was involved. The question is: were those things managed well? They will say they do concession. Even for the railway, what about the management of the thing? Nigeria Airway died, but the Ethiopian Airway is functioning well. We did not manage our own. Have we raised angelic Nigerians to run the new rail transportation system? That is why a country of this nature must come down to live within its means. It is a difficult statement. The best way to put Nigeria together is to have a government that will say, if we make N10, let us live within N10. If you begin to bring big loans, people will believe you still have money and you are rich. They are destroying the future by accumulation of these loans. They are handing over Nigeria to external powers by further accumulation of the loans. They are making the economy more susceptible to external shocks and troubles through these loans.
So, I feel that we are still joking. We must decide now that we want to cut down the cost of governance and whatever makes the 2022 budget that big. Look at the budget and the revelations of what is in it. A particular agency wants to use about N1.3 billion to fund Christmas gifts and funeral ceremonies in a country that we are borrowing to finance the budget. They want to buy mosquito nets with billions of naira that can be used to create sets of modular refineries for the country. So, you begin to ask: what is very urgent? Malaria is a problem, but we have a more serious problem which is poverty. We have been addressing malaria for 61 years. Many of us have lived in the country and at times without mosquito nets on our windows and we have survived. I am not saying health is not important, but when you hear the amount of money voted for mosquito nets, you begin to ask how many mosquito nets do they want to buy? The 2022 budget they are borrowing to finance is inbuilt with all kinds of corrupt projects which are designed to feed people, maybe for election, to make them great and buy more jets for themselves. I do not believe the budget should be built blindly as is being done. You build realistic budget and do things within your capacity. If I want to budget for my household now, I won’t be budgeting based on what I am going to borrow from friends or bank. I have to budget according to my capacity. More so when we know much of the borrowing does not lead to transformation. Until government comes to terms and say ‘sorry, this economy can’t pay the salary you are earning, we can’t afford to be buying N50 million official cars for some people’ and we slash everything to our economic capacity, I don’t see us moving forward economically. Everybody is worried the loan will be used to fund recurrent expenditure and do all sorts of nonsense with it. It is these loopholes that are putting pressure on Naira. When people get billions of naira that they have stolen, they change it to dollar and whisk it out of the country, calling it production. It is not. When people have surplus money here and there, the economy is in trouble. The real people don’t have the money. Those who have it are the people who are stealing money and getting it converted into dollar. They are not fools; they are intelligent people. But they are veiled.
Former President Olusegun Obasanjo got a big debt relief for the country after the country was no longer seen as a pariah state that it was under General Sani Abacha. With the level of debt accumulation lately, can the country get future debt forgiveness?
Even the one you just mentioned is questionable. Nigeria paid over $16billion then. It would have been better not to even pay so that we will know we are an indebted nation. Do you know what $16billion means? The people in the Western world are not forgiving us of any debt. They are collecting extra money. Do you know the number of years we have been paying interest over the loans we took from them? I don’t see it from economic perspective as forgiveness. We paid. Because $16 billion for this economy at that time was a serious amount of money over debt that we have even overpaid in multiple through interest. It is not as simple as you are looking at it. They are not saying anybody will be injured. They just say because of infrastructure, let’s get the loans. Who will pay back and how does not concern them. This is an uncritical analysis of actions. You have to think through in every action. The people who govern Nigeria are not entrepreneurs. They are spenders. They identify projects they want to spend money on and go ahead. Look at the governors and others, you will see that the attitude here is how to spend. The skill to look for what to spend and begin to commission and advertise the projects is what governance has been reduced to in Nigeria. They don’t think about how to get back the money they are spending. When such people think, it is about which loan to take. Many of our spendings are not spent on the economy but on corruption and to support leadership which is supposed to serve the country and pull it out of its economic problems. Wherever we end up, I know Nigeria will survive.
Are you saying Nigeria never got any debt forgiveness under Obasanjo and should therefore not look forward to any in the future?
You spoke earlier as if nothing was paid and I am now telling you that we paid over $16billion then. If all the loans we are talking about were put into certain areas for development, only God knows where our economy and the country will be now. What I am trying to tell you is that our problem is not economic. It is a management and leadership problem, attitudinal problem, party politics problem. If you win, you don’t do party again. You go national to run things. When people finish their term, they run out of the country because their eyes are not here. They just came to reign and disappear. Their children are not here either. They don’t care if the country is wrecked.
The value of naira today is not something anybody will be proud of. A number of measures have been taken by the CBN to arrest the free fall of the currency against major international currencies. What is your take on this?
Economically, for you to have your currency strong and stable, you must have something you are offering the international community. The value of a currency is not determined by paper policy. It is determined by the productivity of that country. We only need dollar because we are buying from outside the country. Why is dollar our problem? It is because we are import-dependent in virtually everything. The CBN is just struggling. All the closing of borders and banning things is just to stop sharp practices. The real determinant of the value of the naira is in what we have to offer other nations. In Nigeria, we have nothing to offer other than crude oil which is a raw material and it commands useless value. There is no way the naira will not be in trouble with this. We import anything into the country. So, there is no magic any policy maker can make. People talk about foreign exchange policy. Which policy are you going to use when you are producing nothing? What the CBN is doing is struggling with minor issues around their policy. But the pressure is there and it is much. The answer is when we produce things in Nigeria, you won’t need dollar to buy such locally produced goods. I don’t want to talk about the useless travelling that people in government make and which have no positive effect of growth of the economy. These are issues that are key. If we crucify the man that is even there, there is little he can do within his understanding. But we are looking away from the real problem. And when you look away from the real problem, you will just be deceiving yourself.
What is your advice to those in government?
They are already talking about 2023 elections. My question is: why can’t they fight to begin to refine the cheapest thing to produce in Nigeria, which is crude oil and stop subsidy? Why are they not fighting themselves that the refineries must work? There was a time they talked about modular refineries, but they ignored it again. In Ondo State, government can refine fuel there. But they have ignored local refining of fuel because some people are making cheap gains from the current predicament of importation of fuel. If something is not veiling those in government, I believe from Obasanjo till now, we should have solved the problem of refining fuel locally. We can’t stop the problem of subsidy if we don’t refine in Nigeria because the international price will begin to affect us. A country must identify where it has an advantage and has cheap raw materials. Instead of exporting crude oil, we will begin to export refined fuel to our West African neighbours and we will begin to see our currency getting stronger. But now, we are importing refined fuel with subsidy and the fuel is still smuggled to some neighbouring countries. That is the first step. This is what we consume every day and we have the capacity to refine it as a country.
YOU SHOULD NOT MISS THESE HEADLINES FROM NIGERIAN TRIBUNE
Buhari Urges MTN For Quality Service, Downward Price Review In Cost Of Data, Other Services
President Muhammadu Buhari Friday at State House Abuja urged the MTN Group to make the available top-of-the-range service to its Nigerian subscribers…
We Have Not Had Water Supply In Months ― Abeokuta Residents
In spite of the huge investment in the water sector by the government and international organisations, water scarcity has grown to become a perennial nightmare for residents of Abeokuta, the Ogun State capital…
Selfies, video calls and Chinese documentaries: The things you’ll meet onboard Lagos-Ibadan train
The Lagos-Ibadan railway was inaugurated recently for a full paid operation by the Nigerian Railway Corporation after about a year of free test-run. Our reporter joined the train to and fro Lagos from Ibadan and tells his experience in this report…
and then