The budget and external loans

A national newspaper recently quoted me as being opposed to the proposal by the Federal Government of Nigeria to obtain an external loan of U.S. $30 billion.

What actually happened was that I was called on the phone and asked for my comments.

My two text messages regarding the proposed US $30 billion loan were as follows:

·      ‘’Little drops of water make a mighty OCEAN OF DEBT’’, and

·      ‘’The devil is in the details- why you need to borrow; the terms and tenor; what you plan to spend it on; and of course your absorptive capacity as well as the means and wherewithal to pay back.’’

Consequently, there was no basis to support the allegation in the publication:

‘’However, the concern of many of those opposed to the loan request is that the Federal Government should be more circumspect rather than throwing caution to the wind.

One of those who share this sentiment is Bashorun J. K. Randle, renowned accountant and public commentator.

In a chat with The Nation at the weekend, he said the country was better off not accepting any loan at this point in time because of the adverse effect attached to it.’’

Clearly, I did not oppose the loan. It is a highly sensitive and delicate matter. It is not a subject to be trifled with.

It may interest you to know that my firm has been tracking Nigeria’s external loans since the first jumbo loan of U.S. $ 1billion from the International Monetary Fund [IMF] in 1978 during the tenure of General Olusegun Obasanjo as the military Head of State. Nigeria did not need the loan. Neither did we actually ask for it. It was meant to be a stand-by credit in case of need.

We have over the years catalogued the subsequent loans and the fiasco of private sector loans that subsequently metamorphosed into government loans and the shambles into which we were plunged via the Paris Club and London Club debts that resulted in massive documentary frauds accompanied by ‘’interest being charged on interest at compound interest.’’!! Perhaps we should add that the ‘’Cement Armada’’ and the detection of rickety ships loaded with sawdust instead of essential commodities, raw material and machinery remain indelible in our memory.

Indeed, when the then Minister of Finance, Chief Anthony Ani presented his annual budget in 1995 he publicly disclosed that included in Nigeria’s external debt was an amount of U.S. $1 billion which was ostensibly borrowed by Nigeria but was actually shared amongst eight prominent Nigerians whom he declined to name. The funds never reached Nigeria! Nobody asked any questions about such a weighty issue.

Apart from Nigeria’s external debts, we have forwarded forensic audit reports to the Federal Government; The Senate and the House of Representative over matters such as;

·      Fuel Subsidy

·      Joint Venture Cash Calls

·      Reserve Additional Bonus [RAB]

·      Floating Production Storage Offshore [BONGA]

·      Abacha loot

·      Nigeria’s cash and other assets in foreign countries

·      Nigeria’s phantom debts [External and Domestic].

The response has been resounding silence and subversive indifference in sharp contrast to the superlative reception accorded ‘’foreign accountancy firms’’ with whom our government is so much enamoured. It was to no avail that our professional colleagues in the diaspora demanded to know how much was paid for the services of foreign forensic audit consultants and what value was obtained.

It bears repetition that the ethics of our profession would not permit us to divulge confidential matters in the public arena. Reticence and circumspection are the watchwords. We must not kill the prospects of hope and possibility of redemption. Regardless, we must have a Plan B.

The intricacies of the external/domestic debts and the budget are like Siamese twins. Both require meticulous and skillful management. While it is true that managing the budget is not rocket science, nevertheless it comes pretty close. Particularly having regard to the volatility of the Nigerian political economy, the budget must be anchored on a thorough debate of the contending demands versus available resources; and intellectual/professional rigour derived from intimate experience of our nation’s economic history and a very critical factor that is often ignored at our peril- namely the unpredictability of the behaviour of Nigerians in economic matters. For example, in most countries, when the price of an item increases, the demand for it would drop. In Nigeria, it is sadly the reverse.

Right now, the more expensive the U.S. dollar is, the more the demand for it.

Besides, we have to contend with the slew of scandals and corruption which have gulped huge ‘’Intervention Funds’’ and ‘’Incentive Guarantees’’. Regardless, it is of utmost importance to get technical aspects of the budget right. This requires dealing not only with figures but also a vast amount of data. Fortunately, there are numerous tools at our disposal – ranging from econometrics; analytics; computer models, financial modelling, to scenario planning and algorithms e.t.c.

The assumptions on which the budget is anchored must be realistic, transparent and sufficiently flexible to accommodate unfolding changes.

It is inevitable that we would have to deal with the perennial contest between fiscal policy and monetary policy.

It behoves the Governor of the Central Bank Mr. Godwin Emefiele to guard the independence of the Bank and insulate it from political interference regarding monetary policy –exchange rate; inflation rate and interest rate. The Chairman of the United States of America’s Federal Reserve Bank, Janet Yellen is already preparing for the threat posed by Mr. Donald J. Trump the President-elect with regard to the independence of the Bank. Many of our most eminent economists have vigorously argued that monetary policy is the pillar of the economy. Where does that leave our Ministry of Finance which is charged with fiscal policy? The answer is co-operation and understanding between President Muhammadu Buhari; The Governor of the Central Bank of Nigeria, Mr Godwin Emefiele and The Minister of Finance, MrsKemiAdeosun. Also, whichever way we lean, we must admit that the budget would require political tailwind if it is to fly. An essential ingredient of the tailwind is public trust.

·      To be continued next week

 

J.K.Randle