THE borrower, says the good Book, is servant to the lender. It is therefore not surprising that since mid-September when President Muhammadu Buhari presented a request to the National Assembly seeking approval to borrow $4 billion and €710 million loans from bilateral and multilateral organisations to fund the deficit in the 2021 budget, there has been palpable unease in the polity, with even members of the disturbingly pliant Senate expressing dismay at the rapidity with which the president’s loan requests were approved by the Ahmed Lawan-led leadership. The latest request, which was read by the Senate President at the Senate Chamber on September 14, also included a grant component of $125 million. These were in addition to the $8.3 billion and €490 million loans contained in the initial 2018-2020 borrowing plan.
It is beyond disturbing that since President Buhari came into office in 2015, Nigeria’s foreign debt stock has risen by over 300 per cent. The administration increased the country’s debt from $7.3 billion in 2015 to $28.57 billion in 2020. This means that the president has added 303.9 per cent or $21.27 billion of foreign loans to the country’s debt portfolio. Domestic debt was N7.63 trillion in December 2020. Overall, the Buhari government has had an accumulated debt of N17.06 trillion as of March 2021, using the N381 exchange rate. According to the Debt Management Office, Nigeria’s public debt stock as of March 31 was N33.107 trillion. The composite debt stock of the Federal Government of Nigeria, the 36 state governments and the Federal Capital Territory (FCT) stood at $87.239 billion. These debts are owed to the World Bank, French Development Agency, China-Exim Bank, International Fund for Agricultural Development, Credit Suisse Group and Standard Chartered/China Export and Credit and others.
We are worried that this government is taking the country through a familiar route which does not bode well for the health and development of the economy. Already, a disturbingly large portion of the budget is used to service debts. This was the situation in the 80s and 90s when the government was forced to adopt the Structural Adjustment Programme as a way out of its fiscal crisis. The programme was a bitter pill imposed on the country by its creditors. The programme, and its attendant protracted crisis, accounted for the many institutional challenges that the country continues to grapple with on both economic and societal fronts today. But the government continues to maintain that its borrowings are necessary and good for the economy. In its latest request, it provided a list of projects spread across the six geopolitical zones of the country to be financed with the loans as justification. It equally argued that it had a low debt-to-GDP ratio.
Of course, similar arguments were proffered for the previous accumulation of huge, unserviceable debts that plunged the country into crisis and subjected it to the draconian ‘conditionalities’ imposed on the country by creditors. We remind the president and his economic advisers that previous administration worked hard to remove Nigeria from the debt overhang of the past. Indeed, it was under the President Olusegun Obasanjo government that Nigeria struck a deal with the Paris and London clubs for a debt buyback of $18 billion that put the country in a comfortable position before the advent of the current government.
Several experts have cautioned the government to be careful in accumulating debts. They warned that these loans would not pay out themselves. Borrowing in a situation where the country’s revenue profile is very low while the debt service is very high is not sustainable, yet the government keeps coming up with new borrowing plans. The mono-mineral nature of the economy ensures that the fate of the country is subject to the volatility of the international oil market. The price of this commodity is not determined by the country. In addition, the production quota is set by the Organisation of Petroleum Exporting Countries (OPEC). So, the country does not determine the quantity it can produce. Alternative finance options for infrastructural development have also been suggested. These include domestic resource mobilisation, public-private partnerships; securitisation of assets, especially of government-owned enterprises, and reduction of frivolous expenditure.
We call on the National Assembly to stop approving the requests for additional loans by the president because they put the country’s future at wanton risk. The latest request for loans should be spurned by the National Assembly. The lawmakers should urge the president to explore alternatives to these loans. The government must not return the country to another debt overhang. Once again, we call on concerned Nigerians and civil society organisations to force the hand of the lawmakers to ensure that they do not approve additional loan requests from the president.
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