The House of Representatives has deferred debate on the Federal Government’s request for approval of a $22.7 billion loan that it would source from at least four lenders. The action of the HOR came after the Senate had approved the loan despite trenchant criticisms and objections. It has now emerged that the Senate was willfully negligent in giving its approval.
The loan request does not satisfy several constitutional and legal requirements and conditions precedent. It is deficient on several grounds and calls for a second and third look.
First, it does not meet the requirements of the Fiscal Responsibility Act (2007) which under Section 44 (1) provides that “Any government in the Federation or its agencies and corporations desirous of borrowing shall specify the purpose for which the borrowing is intended and present a cost-benefit analysis, detailing the economic and social benefits of the purpose to which the intended borrowing is to be applied.”
Subsection 2 further stipulates that each borrowing must comply with these conditions. They are a) the existence of prior authorisation in the Appropriation or other Act or Law for the purpose for which the borrowing is to be utilised; b) The proceeds of such borrowing shall solely be applied towards long-term capital expenditures.”
There are 35 items listed as purposes and projects that the government would execute with the $22.7 billion loan. A briefing by Logosphere Advisory Services led by former NERC Chairman Sam Amadi shows that only two of the items feature in the Appropriation Act. Those that pass muster are the Mambila Hydro Electric Power Project Mentioned under Code: ERG10109723; Amount 2,000,000,000; on Page 941, Volume 2, Appropriation Act 2020. The other is Lake Chad Basin Commission. It is listed under code 0252039001 as Lake Chad RBDA; Amount 3, 928,824, 204; page. 1258, Volume 2, Appropriation Act 2020.
Other considerations for such foreign loans include compliance with the prescriptions of the Debt Management Office Establishment Act 2003 and the Investment and Securities Tribunal 2007. Under the DMO Act, the FG should provide to the National Assembly Foreign policy objectives underlining the request or proposal; Terms and conditions of the grant or loan; Benefits which Nigeria stands to derive from the grant or loan; and State of the relations existing between the foreign state or international body and Nigeria at the time of the request or proposal.
The Investments and Securities Act demands that the FG in requesting the loan should show evidence and be approved only if “the total amount of loans outstanding at any particular time, including the proposed loan, does not exceed 50 percent of the actual revenue of the sub-national concerned for the preceding year.” Part XV of the Investment and Securities Act so stipulates.
Finally, the loan does not cohere with the Economic Recovery and Growth Plan of the FG nor with its medium-term expenditure framework. There are also issues with the exclusion of the South-East geopolitical zone in projects identified for the loan.
We are glad that the House of Representatives has acted more maturely than the Senate is stepping down discussions on the loan request. It is embarrassing that the FG in making the request failed to do due diligence on the statutory requirements for such a procedure. How could this happen with the huge bureaucracy that services the Presidency and the FG?
The dynamics of the oil market in the wake of coronavirus and ego games by the two leading producers of Russia and Saudi Arabia has further destroyed the basis for any such adventurous foreign loan. Nigeria cannot afford such risks now given the instability in earnings and repayment of such loans in foreign currency. We urge both the National Assembly and the Presidency to rest the matter of this quest for an unsustainable loan that Nigeria cannot repay.
