Stopping the accursed $22bn loan bid
Relief has been the dominant emotion on news that the Federal Government has halted the ill-fated quest for a $22.7 billion foreign loan to tackle what it called infrastructure projects. Finance Minister Mrs Zainab Ahmed announced the decision of the government to back track on Monday, 16 March 2020.
The federal government gave acceptable and sound reasons for stopping the quest. Mrs Ahmed stated, “The current market indices do not support any external borrowings at the moment, despite that the parliament is still doing its work on the borrowing plan. One arm of the parliament has completed their work, and the other arm is still working. So, it is a process controlled entirely by the parliament itself. We are waiting.
“The expenditures that are not critical must be deferred to a later date when things become more normal. Several national plans, programmes and projects have been directed at diversifying the production and revenue structures of the economy.”
A confluence of factors contributed to the stoppage of Nigeria’s journey to debt peonage in the guise of a do-good loan. The loan bid did not pass the test of common sense in the first place. Nigeria has been doing a Ben Johnson on the debt track under PMB and now owes four times what we owed in 2015. The new loan would have put us in hock straight. It took 25 years to be free from the loans of the 1980s that did not serve useful purposes.
The convenient rationale is that coronavirus infected the loan. The drop in oil prices followed the convergence of the virus with its debilitating effect on production across the world with the ego wars of Russia and Saudi Arabia. Any pretence to using oil earnings as grounds for repayment of the loans went out the window. Many other factors nailed the loan bid.
Nigeria was over-leveraged in the eyes of the experienced risk managers in all the places where we sought the loans. We simply did not meet the criteria for grant of such huge loans given our track record on existing loans. Remember we wanted this loan from a bouquet of agencies including the World Bank, African Development Bank, Islamic Development Bank, Japan International Cooperation Agency, German Development Bank, China-Exim Bank and the French Development Agency.
Negativism was a central feature, as is the character of the Federal Government of Nigeria circa 2015-to date. In listing projects that Nigeria would fund through the loan, the Federal Government conveniently forgot the South East region. Senate Minority Leader the distinguished Enyinnaya Harcourt Abaribe drew the attention of his colleagues to this fundamental error to no avail. The Senate acted without the maturity expected of the upper chamber and went ahead to approve the loan request.
Note that the federal government presented and positioned the loan as a critical step in its economic programme. Yet, they could not do basic homework of compliance with all the bureaucracy available to it. So, too, the National Assembly. It is frightening
The South East has been boiling in anger over this slap in the face. The Buhari administration has yet to read the Fundamental Objectives and Directive Principles of State Policy in our constitution that charges the government to “promote national unity and command national loyalty” as well as “promote national integration” by ensuring there is no discrimination on any grounds.
In passing the request without substantial debate and deliberation, the Senate walked the paths of error, illegality and dishonour. Like the Federal Government, the Senate showed crass ignorance of legislative procedure on such a crucial matter. It is scary and sad.
The Senate rubber stamped the loan request in full disregard of constitutional and legal procedures outlined in various legislations. Both the Senate and the Federal Government pretended as if these laws do not exist or that we are a nation of heedless persons.
The House of Representatives stood down debate on the loan last week in the first inkling that the National Assembly was now alert to its wrong path. We must thank Dr. Sam Amadi and his Logosphere Resources team for their citizen advocacy effort in the form of a briefing to a member of the House.
The $22.7 billion loan bill as packaged by the Federal Government and sent to the National Assembly breached the Fiscal Responsibility Act, the Debt Management Office Establishment Act 2003 and the provisions of the Investment and Securities Act 2007.
A request before the National Assembly must meet three criteria. The application should have, in Section 44 (1) of the Fiscal Responsibility Act, “cost-benefit analyses” detailing the economic and social benefits of the purpose to which the intended borrowing would be applied. There must exist “prior authorisation in the Appropriation Act or any other Act or Law for which the borrowing would be used” and “the proceeds of such borrowing shall solely be applied towards long-term capital expenditure”.
Note that the federal government presented and positioned the loan as a critical step in its economic programme. Yet, they could not do basic homework of compliance with all the bureaucracy available to it. So, too, the National Assembly. It is frightening.
Only two of 35 projects listed under that loan are in the 2020 Appropriation Act, in accord with the law. The rest are a jumble of projects with titles sounding like student essays.
The projects when executed will earn income in Naira. Yet Nigeria would repay in foreign currency. There is a clear mismatch and it runs across all the projects.
It is good that this loan bid that would have added to the wounds of Nigeria has been rested. It should rest. Should the government need to revive it for any reasons it should pay attention to process, be inclusive and be sensitive to all Nigerians.