NASS, halt further loan approvals for Buhari


THE new updates on Nigeria’s huge debt profile from the Debt Management Office, the rejection of new loan requests by the China Development Bank, and frantic efforts by the Federal Government to borrow more raise additional concerns on the country’s finances and its future. Enabled by a pliant National Assembly, the President, Major General Muhammadu Buhari (retd.), has not only amassed a national record-breaking debt burden in eight years, but is also seeking more in his last weeks in office. He should be stopped. Federal legislators rubber-stamping his loan approval requests should in the national interest stop granting any further licence to the regime.

The DMO disclosed that the total national debt stockstood at N46.25 trillion by December 2022, translating to 23.20 percent of GDP, up from N44.06 trillion in September 2022,which was 22.47 percent of GDP.The domestic debt component was N27. 55 trillion, while the total external debt stock was N18.70 trillion. The slight increase was due to new loan acquisitions by the federal and state governments to fund budget deficits and execute projects.

Total public debt, said the DMO, therefore increased in dollar terms by $7.34 billion within one year; from $95.77 billion in December 2021, to $103.11 billion a year later. On Buhari’s thriftless watch, external debt rose from $10.3 billion in June 2015 to $40.06 billion by June 2022. Total public debt was $63.8 billion in June 2015.

Alarmingly, the Buhari regime and the state governors continue to explore new international loans despite having just a few weeks left in office. One example is the recently reported $800 million grant given by the World Bank to the Federal Government for another dubious “subsidy palliatives” funding.

The consensus on Nigeria’s economy and its rising debts is bleak. The World Bank in a 2022 report said that Nigeria’s debt was at risk of becoming “unsustainable” in the long term as macro-fiscal shocks may disrupt its debt-to-GDP ratio. Like others, it finds the government’s excessive recourse to the ‘Ways and Means’ advances from the Central Bank of Nigeria most treacherous to public finances and the economy.

The World Bankalso expects debt servicing to increase from 100.2 per cent in 2022 to 123.4 per cent of federal revenue in 2023, having gulped 118 per cent in the first quarter of 2022. This could hit 160 per cent in five years except broad-based reforms are implemented to “unfreeze” the financial landscape, it warned. The government admitted in 2022 that 119 per cent of revenue was spent on debt servicing.

Distraught, the organised private sector warned that the country would continue to struggle with repayment, fiscal and infrastructure deficit, and possibly national bankruptcy. But both Buhari and the NASS are not listening. For Nigeria’s sake, they should.

Economists agree that borrowing is not intrinsically evil; it is indeed sometimes inevitable such as when internal or external shocks strike. “Reasonable borrowings to finance public and infrastructure development are the key to faster economic growth,” declares a paper in the Cogent Economics & Finance open access journal. Properly channelled into critical infrastructure, job-creating projects, export-stimulation, and productive sectors, it is regarded as an “economic stimulant,” invigorating aggregate demand and output.

Conversely, experts warn that loans when used for consumption, and unviable projects, in the long run crowd out private investment,and inhibit growth through higher interest rates, higher inflation and distorted taxation.

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Recent shocks,including the COVID-19 pandemic and the ensuing meltdowns, the impact of the Russia-Ukraine war, and other conflicts have ignited a global crisis, with many economies battling with record debt levels. Nigeria however blunders badly by borrowing for uneconomic projects, and for projects for which it can better attract foreign direct, and domestic investment; and to sustain a large, blundering bureaucracy and a wasteful governance structure.

London-based think tank, Overseas Development Institute, suggests this four-step approach to managing the public debt; boost alternative revenue sources such as taxation and FDI, improve debt management capacity, improve transparency, and improve national capacity to manage external shocks such as commodity price crashes.

The federal and sub-national governments should drastically raise the tax-to-GDP ratio, which at an estimated 6.0 percent to 8.0 percent, is much lower than the average 16 percent of 31 selected African countries in the Revenue Statistics in Africa 2020 report. The over-reliance on crude oil should be overthrown.

The ongoing folly of borrowing $1.5 billion for another futile “repair and rehabilitation” of the state-owned moribund and loss-making refineries underscores the government’s wrong choices. The refineries, the Ajaokuta Steel Company and other downstream oil sector assets should be immediately sold in transparent, corruption-free auctions to reputed operators.

Extraordinary efforts should be undertaken to attract FDI, which fell to a record low of $468.91 million in 2022, by liberalising the operating business environment and sectors, especially the railways, ports, airports, and steel.

The NASS has been shamelessly culpable in the Federal Government’s acquisition of huge domestic and international loans, even above all established fiscal and statutory thresholds.The House of Representatives approved a N 1 trillion loan from the CBNeven though it had reached its statutory borrowing limit. In November 2021, the Senate approved $16.2 billion loan requests by Buhari, alongside another €1million. These requests are tranches of the 2020 external rolling plan comprising of loans provided by foreign lenders.

Nigeria’s debts have become unsustainable, and this demands that federal legislators halt their enthusiastic complicity. The World Bank recalls that the 41 countries that defaulted on government debt 1980-1985 needed at least eight years on the average to reach pre-crisis GDP per capita levels; in 20 of them, GDP contraction, and repayment crises persisted for over 10 years.

The NASS should not worsen the already heavy debt burden the Buhari regime is bequeathing to its successor. The legislators owe Nigerians and posterity a duty to halt further loan approvals until a new administration takes office on May 29.



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