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$22.7 billion loan: Will our children forgive us?

Contrary to his boisterous voice, the solemn tone and admonitions of my Macroeconomics Professor in University of Manchester during sessions on “public debt in an intergenerational context’ remains fresh in mind even though it happened over 15 years ago. As we quickly learnt, the lowered tone and caution were to draw our attention to the immense seriousness of the issue particularly the long-term implications of public debts. Two questions are normally used to buttress the enormity of the challenge and consequences.

 

First is the challenges of intertemporal allocation consequences of government debt and second, the issues of welfare determination for different generations. As I read and watched the way some APC senators led by the Senate President pushed the approval of $22.7 billion loan request, the view of a friend that Nigeria is really bewitched seems valid.

 

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“I Am not sure they (senators) are aware of their responsibilities. This is not about APC and PDP or PMB and Jonathan, it is about Nigeria today and tomorrow. It is about the future of this country, our children and the unborn generation. Are they (senators) not supposed to subject the loan request to the highest level of scrutiny and debate, examining and re-examining, asking and re-asking questions upon questions on every item and line of the loan request to ensure that it is in the best and equitable short, medium and long term interests of present and future Nigerians? When the consequences of this unpatriotic act of some of our senators start manifesting, many of them will not be there’’, my disturbed friend lamented!

 

Nobody is questioning the government’s claims of enormous infrastructural deficits in Nigeria that might require loans to address, the question, in particular, are on the huge amount required and implications for the present and future Nigerians, the items to which the loans will be used for and the process of approval. In each of these key areas, there are too many unanswered questions. From 2015 when PMB became the president to September 2019, our public debts increased by 108 percent moving from N12.6 trillion to about N26.2 trillion (about $85 billion). As adding additional $22.7 billion will take the total debt stock to about $108 billion, a key question that is normally ignored is the sustainability of the debts particularly our ability to service and repay the debts. In the 2020 approved N10.59 trillion budget, while only N2.46 trillion was allocated to capital expenditure, debt service took about N2.7 trillion, about a quarter of the total budget. Expectedly with additional $22.7 billion, the cost of debt service will exponentially increase though depending on certain conditions.

 

Moreover, when you go through some of the items to which the loan will be supposedly used for, one begins to wonder if we are conscious of the full implications of such borrowing or if we think that it is free money.

 

Nigeria is really a puzzle where the more you look, the less you really see. The list is littered with items that are neither needed nor should be the concern of the federal government. “As it is, most of the money for many of the projects will not be properly utilised”, another friend frustrated with the state of affairs in Nigeria grieved. A typical example is the purported request of $500 million for NTA digitization project.  Others include $100 million for Nigeria Housing Finance Project Guarantee Scheme, $500 million for the National Social Safety Net Project, $50 million vocational training in power sector, $500 million Better Education Service Delivery for All (BESDA), $500 million nationwide Development Finance Project, $450 million Development Finance Project for Ministry of Power, $20 million nationwide Development Finance Project, $1.28 billion MSME project, $100 million Staple Crops Processing Zone Support Project in Kogi State, $200 million nationwide Agriculture Transformation Agenda Support Project II, $500 million nationwide Staple Crops Processing Zone Projects, $150 million Rural Water Supply and Sanitation Project for North East and Plateau State, $200 million Fiscal Governance and Institutions Project, $33.7 million Institutional Strengthening and Implementation of Policy Reforms for Ministries of Works and Housing, and $150 million for the Development of the Mining Industry.

 

Truly, given Nigeria’s already high debt level and as grieved by my friend, some of the projects should not be pursued with loans and should not be the concern of the federal government. With pervasive lack of patriotism and corruption in the country, most of the nationwide projects will either be poorly executed or not executed at all. Even when executed, the utilization of the projects will be disappointing. A very good example is the Digital Bridge Institutes built by Nigeria Communication Commission that are either grossly underutilised or unutilised as is the case with the one in Enugu state.

 

If we are truly interested in the sustainable growth and development of Nigeria, it is important that the PMB led government appreciate the well-established fact that government cannot be involved in everything. There is no need in increasing Nigeria’s debt with items that will be better handled by the state governments and the private sector. All that needs to be done is for the federal government to patriotically accept the urgent need to review the exclusive list with the aim of moving some items such as mining, education, health, agriculture and even power from the exclusive list to the concurrent list.

 

In addition to the need for devolution of powers, more reforms to improve the rule of law, regulatory quality and government effectiveness are what we need as against the lamentable accumulation of debt on Nigerians. Of the total global investible funds, over 20 percent earn negative interests. The question and focus should be on the reasons why these funds are not coming to Nigeria. How can a country of our size and potential attract less than $1 billion in FDI in 2019? These are key issues that should be of focus to attract the needed finance and investment for our sustainable development and growth.

 

To our senators, we implore them to remember that the future of our dear nation is in their hands and in line with our national anthem, may the labour of our heroes past not be in vain and may the God of creation, guide our leaders right!

 

Franklin Nnaemeka Ngwu

 

Dr. Ngwu is a Senior Lecturer in Strategy, Risk Management & Corporate Governance, Lagos Business School and a Member, Expert Network, World Economic Forum. E-mail- fngwu@lbs.edu.ng,

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