It will take Nigeria fifty years to be free –Expert
Buhari leading Nigeria into economic enslavement, recolonisation –Stakeholders
Widespread condemnations have continued to trail the proposal by President Muhammadu Buhari to the National Assembly to borrow a whopping $29.96bn to finance 39 capital projects, with many positing that the country is heading for enslavement and recolonisation. Besides, the Excess Crude Account, ECA, which had a balance of $2.45bn, as at 2015 has been depleted to $324m in less than five years. BABAJIDE OKEOWO in this report chronicles Nigeria’s debt profile and the worrying signal.
When on April 21, 2006, former President Olusegun Obasanjo after a concerted effort to relieve the country of her debt mess declared that the country had paid the last of its multibillion-dollar debt to the Paris Club of creditor-nations, he never would have imagined that a decade after, the country would be enmeshed in an even deeper quagmire of indebtedness.
“Nigeria will not owe anybody in the Paris Club one kobo,” he had declared at that time.
Unfortunately, thirteen years after, the country is indebted to the tune of $83bn. As if that is not worrisome enough, a day after the International Monetary Fund, IMF, warned Nigeria against her rising debt profile, President Muhammadu Buhari sent a proposal to the National Assembly to borrow additional $29.96b to finance 39 capital projects. The loan, if approved, will increase Nigeria’s debt profile to a whopping $113bn, which equals N35trn at N305/$1.
In the letter, dated November 26, 2019, President Buhari urged the National Assembly to approve the loan so it could execute 39 capital projects.
The president explained that it was necessary to resort to external borrowing to fund the financial gap required to address the huge infrastructural deficit in the country, such as power, railway, road projects and assured lawmakers of his resolve to implement the projects in a financially sustainable manner.
Indebtedness instrument of control by creditors, way of enslaving Nigeria –Akinteriwa
As soon as the news broke, it was met with stiff resistance.
Professor Bola Akinteriwa, the Director-General, DG, Bolytag Centre for International Diplomacy and Strategic Studies, said the move by the government to take more loan is not justified and a ploy to enslave Nigeria.
“Indebtedness is an instrument of control of the poorer member-states of the international community. They encourage countries to take loans; when you take the loans, the creditors are regularly in the position to control how the money is spent under various pretexts. Taking loans is akin to empowering the creditors to have direct access to what falls within the exclusive competence of countries taking the loan.
“If we take loans and direct the use into the purposes of growing the economy, manufacturing it will be productive, but in instances when the loan is directed towards recurrent expenditure, then we are enslaving ourselves.
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“Under President Muhammadu Buhari, he met a debt profile of about $10.32bn and in just a little above four years, he has increased the loan by 114 per cent by the second quarter of 2019 to over $22.08bn, and he still intends to take a further $30bn loan, which will increase the debt stock to above $50bn. Then it means that the efforts and pains that the likes of Phillip Asiodu, Okonjo-Iweala and former President Olusegun Obasanjo to make Nigeria debt free are in vain. We have now laid a foundation of indebtedness for the Next level, it is not good enough.
“For as long as we take foreign loans, for as long as the creditors assist us to take loans, the likelihood of Nigeria having an independentism disposition to develop, to grow will be remote.
The way forward is for Nigeria to accept to suffer for once on the basis of self-reliance, the loans are never taken to ensure self-reliance in the first place,” he said.
On his part, a public affair analyst, Wale Gomez, expressed worries on what the borrowed fund is being used for despite the huge sum of money reported to have been recovered from alleged looters.
“When this government started in 2015, our debt stock was at $10.32bn, today it is at $22bn. This indicates that there has been an escalation of borrowing without commensurate result to show for the borrowing, which is worrisome. When you borrow this huge level of money, there should be a multiplying effect to that. If you have borrowed a 114 per cent increase from 2015 to date, we should see the result. The statement of fact is that Nigerians are not feeling the effect of the borrowing.
“Before we even start talking about borrowing, what happened to the various huge sums of money that were reported to have been recovered from looters by the Economic and Financial Crimes Commission? Why can’t the government use some of these monies to augment the budget so that we won’t have to resort to borrowing?” Gomez asked, adding: “When you borrow, you have to accrue interest.”
Nigeria’s growing list of creditors
Multilateral loans from the World Bank Group, African Development Bank, AfDB, at the end of June 30, 2019, stood at over $12bn. Commercial loans from Eurobonds and Diaspora Bonds stand at over $11bn. Bilateral loans from Exim Bank of China, Exim Bank of India, The Agence Française de Développement, AFD and the likes of them stands at $3.27bn.
Projects not capable of repaying the debts –Expert
A foremost financial expert and Dean, Faculty of Business Administration, University of Uyo, Professor Leo Ukpong, is skeptical about the capacity of the country to repay the debts in the next 50 years, going by the situation on the ground.
Speaking to The Nigerian Xpress, Ukpong stated that it would take a visionary government 50 years to dig Nigeria out of this current debt mess, which is something he does not see happening anytime soon.
“It is a huge concern on our ability to repay these debts, the fears expressed by Nigerians and the international organisations like the International Monetary Fund, IMF, and the World Bank are very justified and correct; the rise in debt is too fast and too high, we need to scale down.
“I do not see how this administration and even incoming administration will be able to repay these debts. The plan by each administration is to come, accumulate the debts and go, leaving it to the next administration and the cycle continues. If we have a very good government today, at the current rate of our debt accumulation, it will take us 50 years to dig ourselves out of the mess; the rate is so high. If you have a single source of income and you spend it faster than it comes, you are in trouble. If you are borrowing to spend, you will run into a bigger problem. If you have a source of income and your expenditure is two or three times more than what is coming in, you will go bankrupt. That is the position that we have put ourselves in Nigeria,” he said.
Speaking further, Ukpong revealed that the projects that the borrowed funds are being deployed to are not capable of paying the debts.
“Unfortunately, if we look at what we are expending this money on. I have been hearing them talk about infrastructure, I am not sure what infrastructure they are talking about. Building roads will not necessarily repay the debts we are incurring. If you are rebuilding dams that have been destroyed by Boko Haram, it will not return economic development; you are merely stabilising things that have spoilt. What we are putting the debt into is not going to generate the revenue needed to repay the debts.
“They also said they are building rail. This is good but what will the rails be bringing in and out of the country? Rails bringing in goods from the North, which are not exportable and competitive in the international market? The rail will only carry things that we import to parts of the country. Rail should be bringing things in and out of the country to the ports for shipping.
Sadly, all those things, which we used to have a comparative advantage in the 50s and 60s are no longer there. It doesn’t look good at all,” the professor added.
He then wondered how the country would be able to repay the debts.
“Remember that our major source of income is crude oil and we are not the biggest producer; so, we do not control the price. If this is something that we control, we can reduce the supply to cause a spike in the price by commanding high price for a limited period, then we may be able to pay. But, we do not control these factors. Russia, China, Venezuela and even Saudi Arabia, who control the cartel are all there; we are just a small player. Saudi Arabia is doing all it can to diversify her economy away from oil to look like Dubai. Dubai does not have oil but they are one of the richest economies in the world. We are not doing that. As new technology emerges, the price of oil will continue to go down because most countries are looking towards alternative energy source. As more countries continue to migrate towards these other energy sources, it will affect the price of oil negatively which will, in turn, affect our ability to service the debts,” he said.
Nigeria can pay her debts if…
Ukpong, however, expressed optimism that if certain measures are put in place, the country might just be able to repay the loan while also warning on the ripple effect of overtaxing the citizens, which can be counter-productive.
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“If we use the borrowed money to subsidise the privatisation of industries, this will help us. There must be massive industrialisation in the areas of mining, ports building and expansion. If we can also manufacture many of the raw materials we need in our country for the various projects we embark on, this way, we can generate revenues to pay back the debts.
We must also cut down our recurrent expenditure, that is salaries, estacodes, travelling abroad for seminars that don’t add any productivity to the country. The Presidency is the most powerful institution in the country. As such, they must set the direction. The Minister of Finance hardly talks about scaling down of expenses, instead, all their focus is on raising taxes. Taxes kill economies. When you impose too much taxes, you kill the economy, there is a level of tax you can impose and have a healthy economy, but when you exceed this limit, economic activities will go underground because taxes must be paid by consumers. If your income does not grow, you will consume less, and when you consume less, the economy will shrink. The political leader of this country has to bite the bullet. If the leadership is not bold enough to change, we will continue to wallow in this quagmire of debt. I do not see how we can change by doing the same thing. I do not see this present administration, providing the clear direction on the way to go. in fact, I see them escalating the debt even further. The mindset is to get as much as they can and let the next administration worry about it,” he concluded.
Amidst constant borrowing, ECA depleted to $324m in 2019 from $2.45bn in 2015
Another worrisome trend is the depletion of the Excess Crude Account, ECA by this current administration.
As at 2015, the amount in the ECA was about $2.45bn but as at October 2019, the fund has been depleted to about $324m. The ECA, which was created by former President Olusegun Obasanjo in 2004 for the purpose of saving oil revenue in excess of the budgeted benchmark, had a balance of $20bn in January 2009.
In the 2015 fiscal period, the Federal Government gave approval for the withdrawal of N458.14bn from the ECA. From this amount, N359.39bn went into petroleum subsidy payment; N98.19bn was used for revenue augmentation to the three tiers of government.
For the 2016 fiscal period, the Federal Government withdrew the sum of N85.17bn to augment revenue to the three tiers of government, while the sum of N76.25bn was transferred to the Nigerian Sovereign Investment Authority in 2017.
The Federal Government withdrew the sum of $2.87bn from the Excess Crude Account in the 2018 fiscal year, documents obtained from the Budget Office of the Federation revealed.
The withdrawal for 2018 is significantly higher than the $250m taken in the 2017 period by about $2.62bn.
Based on the analysis of the figures from the Budget Office, the sum of $1.76bn was withdrawn in the fourth quarter of 2018 by the government for the Paris Club refund to state governments.
The $1.76bn represents about 61 per cent of the entire $2.87bn withdrawn during the 12-month period.
Further analysis of the figures showed that the sum of $496.37m was approved by President Buhari and withdrawn for the purchase of Super Tucano aircraft.
The withdrawal of the amount, according to the Budget Office, was made in the first quarter of 2018.
Similarly, the President gave approval that the sum of $380.51m be withdrawn for the first batch of procurement of critical equipment for the Nigerian Army, Navy and Defence Intelligence Agency.
The withdrawal of the $380.51m was made in the fourth quarter of 2018.
In the same vein, the Federal Government also gave approval that the sum of $233.29m be withdrawn for states matching grant to the Universal Basic Education Commission. The amount was taken out of the ECA in the fourth quarter of 2018.The account also incurred bank charges of $122.23m during the 12-month period.