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Nigerians express fears over new FG’s borrowing plans



By Yusuf Mohammed


News of the Federal Government’s decision to revive earlier suspended plans to engage in fresh external borrowing amounting to almost $30billion dollars has stirred fears once again among Nigerians with many cautioning that this may create even more financial challenges for the nation going forward.

Revealing the government’s plans on the subject via a correspondence to the Senate last week, President Muhammadu Buhari asked the lawmakers to assent to the proposal which came originally as part of the federal government’s 2016 to 2018 external borrowing plan.

According to him, the loan would be spent on financing key infrastructural projects across the country.

Polity watchers say that given the changes that have been made this far in the National Assembly and as had recently been witnessed with the companion Finance Bill that had been sent to the Assembly, the new proposal would likely sail through the lawmaking chamber almost effortlessly.

This is notwithstanding the fact that the letter did not expressly state the amount to be borrowed though it explained that the external borrowing plan targets projects across all sectors with special emphasis on infrastructure, agriculture, health, education, water supply, growth and employment generation.

According to the President also, the request is being made pursuant to Sections 21 and 27 of the Debt Management Office Establishment Etc, Act.

Referring to the earlier attempt to get the plan through, the president observed that it had not been approved in its entirety by the legislature.

“Only the federal government’s emergency projects for the North East’s four states projects and one China-Exim assisted railway modernisation projects for Lagos-Ibadan segment were approved out of the total of 39 projects.”

“Outstanding projects in the plan that were not approved by the legislature are nevertheless, critical to the delivery of the government’s policies and programmes relating to power, mining, roads, agriculture, health, water and educational sectors.

“These outstanding budgets are well-advanced in terms the preparation, consistent with the 2016 debt sustainability analysis undertaken by the Debt Management Office and were approved by the federal executive council in August 2016 under the 2016-2018 external borrowing plan,” the letter read.

In an interview with Business Hallmark, and on the sidelines of the Spring meeting of the IMF in Washington DC, Finance Minister Zainab Ahmed, whom the President has asked lawmakers to liaise with to clarify any queries they may have on the plan had remarked that insinuations of a looming debt crisis in Nigeria may be exaggerated.

‘Again, Nigeria does not have a debt problem. What we have is a revenue problem. Our revenue to GDP is still one of the lowest among the countries that are comparable to us at less than 20 per cent of GDP. What the World Bank and IMF recommend is up to 50 per cent of GDP for debt of countries our size. We are not there yet, so the problem we have is a revenue problem.

The underperformance of revenue is causing significant strain on our ability to service debt, to service government day-to-day expenditure. That is why all the work we are doing in the ministry of finance and other economic ministry is to concentrate on driving the increase in revenue.’

Beyond the minister, other senior government officials, of whom the Director General of the Debt Management Office is a prominent number, agree with the minister’s position.


On his part, IMF Senior Resident Representative and Mission Chief for Nigeria, Mr. Amine Mati has said Nigeria’s debt to GDP ratio which the IMF projects to be at 28 percent, has increased but still below the average in sub-Saharan Africa and Africa.

He was speaking at the public presentation of the Fall 2019 issue of the Regional Economic Outlook for Sub-Saharan Africa in Lagos last week.

But putting a balance on the subject, Mati equally observed that the revenue to GDP position was quite low and urged the federal government to increase its drive to create more new jobs and revamp its fiscal consolidation.

“Nigeria debt has increased but the level is way below the average for the region. Even if we include the CBN overdraft and others we are talking about a debt to GDP ratio that doesn’t go beyond 27 to 28 percent to GDP and that is including AMCON overdrafts etcetera.”

“Nigeria is still on 2.3 percent for 2019 but for 2020 we project a growth of 2.5 percent, so it is still not growing as fast as the others for a variety of reasons including some of the structural reforms and others but it is picking up,” Mati remarked.

He however also called attention to another potentially looming flash point:

“With the trade tensions between America and China, export growth of the region has gone down. And the volume of trade for the region as a whole and globally has gone down almost to zero. So whatever happens externally will also impact Africa. The demand is down but for countries like Nigeria that depend on natural resources, lower demand for oil would impact on the price also.”

It will be recalled that at the joint annual spring meetings with the World Bank in Washington DC, the IMF had expressed worry over Nigeria’s ability to repay its foreign debt, which was put at N24.387tn.

In October, the IMF at another forum called for an effective debt management strategy that would ensure that the amount borrowed posed limited risk and the funds deployed for developmental purposes.

Asked to respond to the FG’s thinking that there is really nothing to worry about on their new borrowing plan, the analyst, Henry Ezeh said:

‘The borrowing binge of the FGN is troubling. Apart from the intergenerational implications it has (the younger generation of Nigerians will sweat their butts off long after this generation of leadership dies in ignominy); the overall fiscal stability of the country is at risk. As things already stand well over 60% of revenue in 2020 will go into debt servicing and piling on more debt without clear project by project justification to ensure self-financing and self-sustainable cash flows is lunacy!!!’

Ezeh is not alone. In his own view on the 2020 budget projections and more notably the size of the recurrent expenditure component and the accompanying high debt situation, Dr Kalu Idika Kalu, a former IMF top brass and one-time Finance Minister, observed that the challenge was indeed even graver:

‘I don’t even think it’s necessary for me to go into all those fractions. By acts of omissions and commissions, by the time you adjust those nominal values or real values, you find out that those budgets are small relative to the enormous problems that we have. I don’t think the analysis requires you to even be focusing on those little percentages that would be going to debt service, recurrent and capital expenditure. It is clear that our budget is one of the smallest in the world in relative terms. What that really connotes is that our public sectors, and I’m including federal and states and other public agencies, we are not really socially mobilising enough.

When you don’t mobilise enough, your revenues will be small because the base from which you are mobilising is not responding to the need for further development through the public sector. If you are providing schools, hospitals, roads and what have you, it is so much easier to rationalize the basis for higher levels of mobilisation, which will result in higher real and relative values of your budget in relation to your GDP. We have one of the lowest in the world, the bottom five percent. What that shows is that governance is not mobilising the people. Mobilisation here is the freewill of the people. We are not talking about militarising them and forcing them to pay for this and that, that’s not the desired level of mobilisation or the quality of governance that we need. We need the consent of the people. There is a contract between the government and the people. We give you our taxes because you are going to use the totality of this revenue to give back education, roads, hospitals, transportation and all kinds of services. It is those governments that are able to provide those services that have very high mobilisation; very high budget in relation to their national income. We are at the other end.

Now, the question of how much we spend on recurrent. Ideally, by now, we shouldn’t really be spending more than 60 percent. But as I said, I don’t want to play on percentages. We should not be spending less than 30 or 35 percent on the capital side. The debt should just be a fraction. But that fraction could be much higher than what we have now in real terms, if the growth is as high as it should be. That’s why I said that those percentages are not the issue; it is the real nominal value that will show you whether we are doing well or not. And we are not doing well despite the fact that the percentages already tells you that we must be spending too much on overheads. We are probably spending ridiculously too much, especially on salaries, in relation to income.

And certainly, given the level of social services and the hard infrastructure, we are spending far too little on incremental investment and maintenance. Those are obvious enough; you don’t have to do any in depth analysis to arrive at that conclusion. ‘


In his own view, the banker and businessman, Alex Otti says that saying that the problem is not debt stock but revenue may not really address the broader issues:

‘First of all you need to cut our clothes according to our size. Size or cloth which one is important; I think it is the cloth. You cut your coat according to your cloth; if you’re too fat you need to come down; otherwise you will be struggling with it. To that point you first have to recognise what we have. You need to be realistic, the first argument is that we have a lot of people and it’s not a problem. We are not the most populous nation in the world but if we have a nation that is not economically productive you have a big problem.

So when you look at absolute sizes, and it’s not the magic: GDP is $450 billion; that is the biggest economy in Africa, right. When you now begin to look at the GDP per capita which is the most important thing, if we share that GDP what will everybody get? So in real term, we are a very poor country. So we have about $1700 and South Africa is chasing $7000, so we are not the same size that is the truth. I can also point to a few countries in Africa where their GDP is chasing 14 or 15000 dollars. So it is actually the number of mouths that you have to feed but you can bring it down.

In the villages where we grew up your father had four wives and 20 children and another man had only one wife and four children and they had the same harvest; you had 20 mouths to feed as against four mouths to feed. So you can see that those people were richer than you. Even though in your farm you may have more farms and hands in absolute number, more yams than they did. The point I was trying to raise is that we must first of all understand our size. Then you can now begin to manage your cost alongside your size. You cannot be flying private jets; maybe you have ten of them in your presidential fleet, when you are not in America. If you cannot afford it you cannot afford it. Now can our economy be bigger than that, of course? Can our GDP per capita be bigger than that, of course?

You must understand where you’re first, tell yourself the truth, and come up with strategies that will take you to where you want to be. If you start by pretending then you will not get there. It is not necessarily to say that our revenue is high, even when you look at our 2020 proposed budget, the revenue projection is 8.15 trillion naira. You and I know that in the last three to four years that we have been only able to make 50 percent of our revenue, 54 percent was the highest; then we have recurrent expenditure of 70 percent of that your budget.

When you are only able to make 50 percent of the revenue, whether you print money there are costs to it. It means that the 30 percent that you allocated to capital expenditure, then you are only able to manage less than 15 percent. Then we have a big problem, in fact, if we do not do something about it, then we will have real financial crisis from 2020. Everyone who understands economics will have to put on their thinking cap and see how we can bring down the cost. When we even look at our recurrent expenditure you find that a large chunk of it is in travels for all the people in the ministries, departments and agencies, for the legislature, for the executive, for the judiciary and so on.

Do we all need to be on the plane? Remember those travels also go with estacodes and all the allowances. The reality is that we are pretending that all is well, while it’s not well. I gave clear instance in the past. In 2017 I had said that we imported a democracy and there is nothing wrong with it. You don’t need to reinvent the wheels all the times.’

For Dr Adi Bongo, Senior lecturer, Lagos Business School

The first question we should ask is what is the money required for?

‘Yes we have funding deficit in almost all the sectors. And we agree that the critical lever that will continue to unleash productivity is infrastructure.

If we want to achieve growth again in order to take care of our growing population we need infrastructure. But the government has not proved to be competent enough to provide the necessary infrastructure. The government has also failed to involve private participation where we have people who can deliver to help in that area.

It is not a good thing that we should borrow. There is liquidity everywhere now. So it is not an achievement to get loans now after all there are many private entities that can help anybody obtain loans now all over. But the problem is that the government is not interested in growing the economy. They are only interested in their pockets. Government has refused to make the market friendly for the private sector to provide this necessary infrastructure and cover these inefficiencies. The government is only interested in micro-managing the stage to support a section of the country it wants to favour and continue to their dominance in the polity.

I do not favour borrowing at this point in time because the govt. has not proven to be competent and efficient in the management of previous resources. I think that what they should do is to give private participation a chance and see if they will not perform and give the growing population the necessary infrastructure. ‘

Some other commentators say that there is indeed even a deeper challenge in that the current borrowing plan seems to focus on just getting in the money and not a more concentric action plan for broader economic sustainability. They say that if this had been more rigorously and dispassionately factored in, then perhaps some greater and broader levels of exegesis and creativity would have been introduced into the entire discourse ahead of the President’s letter being submitted to the Senate.

Some of the possible angles that may have been explored in that case then would have included items like an updated infrastructure roadmap, plans to use local contractors, reverse engineering of each project to determine lowest and highest possible cost, allowance for local consulting firms to participate in bidding processes and setting lowest cost for each project and attaching terms and conditions for failure to deliver

Others are the use of financial services consortia to raise funds, paying for projects as per milestones achieved, floating of an infrastructure development fund and the introduction of Build, Operate and Transfer public/private partnership arrangements.


Indeed, it is in a bid to avoid the borrowing for borrowing sake bent that the 8th Senate had stood down the request for approval for the borrowing plan when it was first presented to them.

Reminiscing on this, one of the serving senators then, Shehu Sani, at the weekend remarked that the threats they had seen then and which had made them to decline giving their unqualified assent to the plan were still a source of concern:

“Our external debt in 2015 was $10.32 billion and it escalated to $22.08 in the second quarter this year, which is 114 per cent, if we had approved that loan request, our external debt could have catapulted to over $52 billion and that is not sustainable.”

“We don’t want our country to be recolonised by creditor banks…we will be walking into debt Slavery and move from landlords to tenants in our country. They will always tell you that even America is borrowing and I don’t know how rational it is to keep on borrowing because another country is borrowing…we will keep borrowing and burying ourselves and leave behind for our children a legacy of debt burden.”

“I have no doubt that if those occupying the position of power today were in the opposition and the government made a request to borrow $30 billion, they could have not just condemned it but will lead a protest against it no matter the reasons advanced.”


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