Will National Assembly approve Buhari’s $29.9bn loan request amid concerns over debt overhang?

A lot of people are worried over the $29.9billion loan request, which President Muhammadu Buhari recently presented to the Senate for approval.

The worry is due to the fact that there are allegations from some quarters that the 9th National Assembly is seemingly a stooge to the executive and it can okay the loan without raising issues.

Apart from accusations and counter accusations, many concerned Nigerians are of the opinion that ordinarily, the debt profile of the country has risen to a frightening height with the desired development and national growth not commensurate.

It is fact that when you borrow, especially for reasons of executing critical projects and for development of infrastructure, the citizenry expect obvious result in terms of completion of the projects, alleviation of poverty and provision of basic amenities.

The $29.9bn loan request by Buhari was rejected  three years ago by the 8th National Assembly because details of the borrowing plan was not submitted with the request and lawmakers said they did not want to plunge the nation into financial jeopardy. Again, the president has presented it to the 9th National Assembly, still without the borrowing plan.

Senator Godiya Akwashiki, spokesman of the Senate, confirmed that the borrowing plan was not yet made available to the Upper Chamber.

He admitted that “the 8th NASS rejected the request because it did not come with the details of what the president wanted to use the money for.”However, he insisted that the 9th NASS will approve the loan request based on its merit.

Buhari had explained that the loan was to execute key infrastructural projects across the country.

Some of the projects he mentioned include; the Mambila Hydro Electric Power Project, Railway Modernisation Coastal Railway Project (Calabar-Port Harcourt-Onne Deep Sea Port Segment), Abuja Mass Rail Transit Project (Phase 2), Lagos Kano Railway Modernisation Project (Lagos-Ibadan Segment Double Track), Lagos Kano Railway Modernization Project (Kano-Kaduna Segment Double Track).

Recently,  while resending the loan request,  the president told lawmakers that out of a total of 39 projects he intended to execute with the loan, only the Federal Government’s Emergency projects for the North East, four states projects and one China Exim Bank Assisted Railway Modernisation Projects for Lagos – Ibadan Segment were approved.

This, he said hindered the Federal Government’s implementation of critical projects in the mining, power, health, agricultural, water and educational sectors.

When the request was first sent to the 8th Senate, before it was rejected, Nigerians expressed worry on what possible financial measures the federal government employed to fund the loan and repay it.

But Kemi Adeosun, former Minister of Finance, told Nigerians that the borrowing plan of 2016-2018 was phased out to enable foreign loans with low interest rate of 1.25percent.

According to her, the loans were to be funded from multilateral institutions including the World Bank, Africa Development Bank (AfDB), Islamic Development Bank (IDB), Japan International Co-operation Agency (JICA) and China EximBank.

However, since Buhari resent the loan request to the 9th National Assembly, financial experts who are conversant with debt management have opposed it.

They want the National Assembly not to grant an approval to the request. They posit that the debt profile of the nation is overhang and that it is capable of throwing the country into financial crisis. They say the serial borrowings are not even impacting the desired national development.

Obadiah Mailafiyah, a renowned Nigerian development economist, revealed in an interview recently that the APC government inherited a debt of $7billion but currently has an overhang of $84billion.

According to the former official of the African Development Bank, the simple meaning is that having inherited $7billion at inception, the government has borrowed $77billion within the past four years, making Nigeria to owe $84billion.

“For the past 30 years, all that Nigeria borrowed was less than $77billion. But within four years, Nigeria has borrowed this much.”

The big questions begging for answers are: what did Buhari and APC do with previous loans? Why talking of another loan of about $30billion? Are there executed projects to show? Why is the borrowing plan not being made available? Can NASS approve the request? What impact has the loans on the living condition of the poor masses?

Meanwhile, information obtained from ‘Total Public Debt Portfolio’ on the website of the Debt Management Office (DMO), revealed that as at June 30, 2019 Nigeria owes N25.7 trillion in debt both domestically and externally.

It said as at December 31, 2018, Nigeria’s total debt stock stood at N24.38 trillion. This figure shows an increase in debt stock of N1.32 trillion.

The DMO said that the current total debt stock comprised of both the Federal Government debt, that of the 36 states and the Federal Capital Territory (FCT).

For the Federal Government, the DMO said it owed N20.42 trillion, while the states and FCT owed N5.27 trillion.

Of the Federal Government debt, N7.01 trillion was categorised as external debt, while N13.412 trillion was categorised as domestic debt.

For the states and the FCT, N1.309 trillion was owed externally, while N3.966 trillion was owed domestically, the DMO said.

Giving details of the Federal Government’s domestic debt stock by instrument, the DMO said Bonds accounted for N9.691 trillion and Treasury Bills N2.651 trillion.

Others are Treasury Bonds N125.9 billion, Savings Bond N10.431 billion, Sukuk N200 billion, Green Bond N25.69 billion and Promissory Notes N707.7 billion.

Meanwhile for debt service in the second quarter of 2019, the DMO said that the nation had spent N76.951 billion.

While addressing House of Representatives Committee on Public Account, in Abuja recently, Patience Oniha, director general of the office, confirmed that “as at June 2019, our debt profile is at N25.7 trillion; this includes the federal, states governments and the Federal Capital Territory (FCT).

“We call it the total public debt, out of this total, the federal government is responsible for 80 percent of the debt,” she said.

Oniha said that external borrowing accounted for about 32 percent of the total debt, while 68 per cent was domestic.

Speaking with our correspondent on the matter, an Abuja based financial lawyer, Desmond Wendeh said if the debt profile of the country is not urgently curtailed, it can bring the nation to financial ridicule.

He said many developed nations engaged in borrowing to impact their development and growth, but that such countries were able to put in place active financial measures that prevented them from accumulated debts.

He opined that till the federal government device ways of internally generating revenue, successive administrations will continue to face financial challenges of repaying debts.

“It is true that the debt profile of the country arising from serial loans is quite worrisome. It behooves on the National Assembly to check the executive, ensure that projects are executed with the borrowed monies and life is made easier for the citizenry.

“Borrowing in itself is not the issue but the question is, are such monies being utilised for the purpose they are meant? Why is government not concentrating on revenue generation? This is the area the NASS must look into and not to just approve loan request sent to it by the president. If this is not checked, in years to come, the country would be plunged into serious financial mess that will become very difficult to resolve,” Wendeh advised.

Solomon Ayado, Abuja