As the nation grapples with huge foreign debt of $11 billion, President Muhammadu Buhari has again begged the National Assembly’s nod for two new external loans of $5.5 billion.
This has not gone well with most Nigerians who see the endless borrowings as an attempt to mortgage the future of unborn generations’.
Although the president gave assurance that “the proposed sourcing of $3 billion from external sources to re-finance maturing domestic debt will not lead to an increase in the public debt portfolio”, this was like a drop of water on an egg.It has no effect on the critics .
Recall that in his letter to the Senate President, Bukola Saraki, Buhari had explained that the first loan of $2.5 billion would be for the financing of the 2017 Budget deficit and capital projects.
The second loan of $3 billion would be for the refinancing of maturing domestic debt obligations through the issuance of Eurobonds or a loan syndication.
The projects listed for execution include the Mambilla Hydropower Project, Construction of a second runway at the Nnamdi Azikiwe International Airport, counterpart funding for rail projects and the construction of the Bode-Bonny Road, with a bridge across the Opobo Channel.
On the $3 billion for re-financing of domestic debts, Buhari said: “In addition to the implementation of the external borrowing approved in the 2017 Appropriation Act, in order to reduce debt service levels and lengthen the tenor profile of the debt stock, the Federal Government seeks to substitute maturing domestic debt with less expensive long term external debt.
“The Federal Government plans to source $3 billion through the issuance of Eurobonds in the lCM and/or loan syndication by banks as approved by the Federal Executive Council at its meeting of August 9, 2017.
“It is important to note that the proposed sourcing of $3 billion from external sources to re-finance maturing domestic debt will not lead to an increase in the public debt portfolio because the debt already exists, albeit in the form of high interest short term domestic debt.
“Rather, the substitution of domestic debt with relatively cheaper and long-term external debt will lead to a significant decrease in debt service cost.”
On the benefits of the loan, Buhari stated: “This proposed re-financing of domestic debt through external debt will also achieve more stability in the debt stock while also creating more borrowing space in the domestic market for the private sector.”
He explained that in the 2017 Appropriation Act, debt service at N1.663 trillion represents 32.73 per cent of the FGN’s total expenditure, which makes it important to take urgent steps to reduce debt service costs.
Commenting on the issue, Mr Wale Bolorunduro, a former Executive Director of Zenith Bank, lamented that the problem with the past leaders was borrowing for the wrong purposes. He advised the Federal Government to avoid such pitfall so that the future generation would not be paying for such costly mistake.
His words: “if we must borrow, it has to be for infrastructure that will improve our economy. We should get our revenue up while we get long term financing to fix our infrastructure but we must come to the table to identify the infrastructure because things must be prioritised and properly matched to bring about optimal solution. We also should avoid error of previous administrations that borrowed to do commercial infrastructure when we could have gotten the private sector to do just that. I will have to say our problem is not borrowing but borrowing for the wrong purposes and if we are not careful, in the next 30 years, the future generation will be paying for that.”
Mr. Odilim Enwegbara, a development economist, argued that the president did not give details of how he would be paying back the loan. He also picked holes in the timing of the borrowing, saying that loans should be tied to a particular fiscal year. “Are we borrowing for 2018 or 2019 fiscal year?”He demanded.
According to him, the projects for the loan should be spread across the six geo-political zones. “You cannot borrow without knowing how you will pay back. We should borrow wisely and it should be investment-driven. Are we investing in roads or agriculture? Are we investing to boost power supply? He has to tell us why he has chosen to borrow in such areas because the problem in this country is that the government borrows on behalf of Nigerians and use the money to develop a section of the country without involving other sections. Most importantly, is he telling us that the money will not be diverted into recurrent? Right now, the government does not have money to pay salary. You do not borrow during a fiscal year.
“Borrow for a particular fiscal year so that it will be factored into that fiscal year. This $5.5 billion, is it for 2018 or 2019 fiscal year? Nobody should give the government money without the details of the facility. The Federal Government should not borrow carelessly. If it must borrow the projects must be spread across the geo-political zones,” he said.
The Chief Executive Officer of GMCS Consult Limited, Mr. Olasehinde Olakunle, expressed fear that these borrowings might drive Nigeria deeper into debt hole and plunge the country into economic servitude.He warned that we should not mortgage the future of unborn generations.
He stated: “I’m dismayed at the rate by which president administration is plunging the nation into debt through local and foreign borrowings without concomitant developmental projects in any sphere of the economy to justify the huge Borrowing.
“We are asking the president to explain to Nigerians what his government has done with the several huge sums borrowed in the last two years in the name of financing infrastructural development in the country.”
But the Chief Executive Officer of International Center for Tax and Research, Mrs Morenike Babington-Ashaye, who disagreed with Olakunle , opined that the loan should be approved against the 2018 budget if it must taken.
Said she: “The Senate should request the President to bring an application for transfer of 70 per cent 2017 outstanding capital projects budget to 2018 budget.
“That way, there will be no carry forward of capital projects. The executive must give assurance that the projects, whose 30 per cent fund has been allocated, will be completed by Dcember 2017.
“The Senate can use the medium term budget to decide the 2018 budget so that we can follow a budget calendar. The Executive is taking Nigerians for a ride with all the flimsy excuses that the 2017 budget started late because money was not released on time. Everything is within its control, so why the excuses. The Senate should ensure budget discipline and discipline the Executive.”
She advised that the Senate should not examine the 2018 budget until the Executive can explain how 2017 budget was spent with physical evidence of projects completed.
“The Executive must also explain how the projects have impacted positively on the lives of Nigerians”, she added.
For Mr. Bunmi Tunji-Ojo, the Managing Director of New Planet Project, there is nothing on the ground to justify the previous borrowings, arguing that “all round infrastructural decay has now reached alarming proportions; the roads have deteriorated; the state of power supply has become worse, and there is no increase in wages to match the skyrocketing inflation”.
“As a result, workers in educational institutions and other government agencies have spent more time at home observing strike than they spent at work; insecurity has sky-rocketted beyond what anyone can imagine.”
Recall that since President Buhari was sworn-in, the nation’s debt has risen by 61.96% in only two years