IMF’s repeated warnings on foreign debt

AGAIN at the recently-concluded World Bank/International Monetary Fund (IMF) annual meetings in Indonesia, the IMF warned Nigeria about its rising debt profile. It advised the country not to be misled by the rising oil prices to plunge into higher debts, counselling that despite the recent recovery, oil prices were projected to remain below the 2013 peak. IMF added that strengthening fiscal positions was critical to reducing debt vulnerabilities for Nigeria.

That made the third time within 12 months that the Bretton Woods institution had expressed concern about Nigeria’s rising debt profile. IMF had warned Nigeria in October last year at its annual meeting in Washington DC, United States. The same warning was handed down in April at the Springs Meetings in Washington before this last one in Indonesia. This shows that the global financial institution considers the country’s insatiable appetite for racking up debt worrisome.

But the IMF is not the only international body that is bothered by Nigeria’s penchant for foreign loans. Several other agencies have expressed similar concern. In the same vein, a number of prominent Nigerians have also spoken against Nigeria’s propensity for amassing debts.  Former governor of the Central Bank of Nigeria (CBN), who is currently the Emir of Kano, Alhaji Muhammadu Sanusi, while advising the government to halt the mounting debts, said the country expended 66 per cent of its total revenue on debt servicing, leaving it with just 34 per cent for both capital and recurrent expenditure. According to him, unless the trend was reversed, development could not happen in Nigeria.

Similarly, Professor Kingsley Moghalu, a former deputy governor of the CBN, said that piling up debts would only end in a sorry tale as history had revealed that reliance on foreign loans did not contribute to the growth of the country’s economy. Recently, the Deputy Secretary-General of the United Nations, Mrs. Amina Mohammed, also added her voice to those warning the country against debt accumulation. Mrs Mohammed, who served as Minister of Environment in the current administration before obtaining the UN job, said Nigeria was steadily returning to its unwholesome past of heavy debt overhang. She lamented that while former Finance Minister, Dr. Ngozi Okonjo-Iweala, freed the country from a huge debt burden, the current leaders were accumulating debts. In spite of the warnings, President Muhammadu Buhari has just requested Senate’s approval for a loan of $2,868,540,000 to part-finance the 2018 budget. In his letter to the Senate on the loan, President Buhari explained that the sum would be borrowed from the international capital market for the part-financing of the 2018 budget’s fiscal deficit and to finance key infrastructure projects in the budget.

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We wonder why the country continues to borrow  at a time of prosperity. The crude oil benchmark for the 2018 budget was put at $51 per barrel, but oil price have been hovering around $80 per barrel for about three months, yet the country continues to borrow. The nation’s oil production has been on a steady rise, resulting in more revenue, yet the government continues to borrow. The Federal Inland Revenue Services (FIRS) was able to rake in N3.5 trillion within the first eight months of 2018, which is over 40 per cent of the total budget, yet the country keeps borrowing. The Nigeria Customs Service (NCS) collected over N1 trillion in the first half of the year, yet the government keeps borrowing. Pray, where does all the money go?

Does the Senate, which must of necessity approve the borrowings before they can be effected, ask the right questions? Is the Senate carrying out its oversight functions on the executive? Why must the country continue to borrow when it is making so much money? What is the justification for the mounting debts? Most of the major roads in the country are deplorable. Health facilities are in a shambles. Sometime ago, the president’s wife, Aisha Buhari, lamented that the State House clinic did  not have drugs. Poverty is on the rise in the country, unemployment has spiked, and many Nigerians have become hopeless because life has become nasty and brutish. So, why is the government borrowing if there is no effect on the people? What has happened to all the money?

If the country continues on this route, its destination will be either the Greek or Venezuelan situation, which is national insolvency. That certainly is not the legacy that President Buhari wants to bequeath to the nation. To avoid that, the president has the responsibility to ensure better management of the economy.