Fears are rife that the approval of a new round of foreign loans by the Senate may translate into a poisoned chalice for Nigeria on the basis of several reasons. The Senate had earlier approved the request by President Muhamadu Buhari for approval of foreign loan package amounting to $22. 7 billion from a complement of external creditors, and for the purpose of addressing several projects in the country ranging from infrastructure to other matters.
The present loan package is a balance from the $29 billion loan request which President Muhamadu Buhari had sent to the Eighth National Assembly, out of which only $4 billion ws approved. The creditors in the exercise are China – $17 billion, World Bank – $2.8 billion, ADP – $1.8 billion, Islamic Bank -$110 million, Japan $200 million, Germany – $200 million and African Development Bank – $480 mission.
However, certain factors have rendered the dispensation a poisoned chalice of sorts for the country, with the fear of unmanageable debt burden for the country as the leading fear. Experts are concerned that the Senate’s approval will escalate the county’s debt stock from N26 trillion to a new high of N33 trillion, which translates into a 28% jump. This sudden rise for Nigeria with an unimpressive outing with debt management and servicing, spells danger for the country both at present and in the future.
The issue of debt management in Nigeria has remained a thorny one for a long time. At least, the two critical factors which have defined the issue have been propriety in utilization and servicing according to schedule. The consequences have been a continuously disproportionate complement of avoidable, debt related obligations on the country over the years. For instance, in recent times the country’s debts have tallied with a quarter of its Gross Domestic Product (GDP). Meanwhile over half of the revenue has been deployed to servicing such debts. The International Monetary Fund (IMF) had also warned that without major revenue reforms, by 2024, the country’s debts may rise to about 36% of GDP, with interest payments claiming as much as 75% of government revenue. Against such depressing statistics it constitutes defective economic logic for the country to indulge in any further debts as such could translate into future insolvency for Nigeria.
Meanwhile the loan package so approved by the Senate remains for all practical intents and purposes hanging in limbo, firstly by losing traction in the House of Representatives, over the lopsidedness of its coverage. According to the Speaker of the House of Representatives Femi Gbajabiamila, the chamber is contending with the situation whereby the loan’s complement of projects excluded the South East geopolitical zone. The situation in the National Assembly was accentuated by the Minister of Finance, Budget and National Planning Zainab Ahmed who recently announced that the country was no more contemplating any foreign loan for now, due to unfavourable global market conditions. Her pronouncement apparently provides an indication of the government’s likelihood of a change of mind over taking the loan.
That notwithstanding, the disposition of the government over foreign loans should not be guided by the transient twists in the global economic environment, but a more holistic reinvention of the country’s fiscal regime that drives it towards the IMF designated revenue reforms which entail more dependence of domestic revenue generation and management, which historically, constitute the ‘Archilles Heel’ for successive Nigerian governments at virtually all tiers of governance.
The historical disposition of governments in Nigeria towards loans whether foreign or domestic, is as if loans are free funds that can be disbursed at the whims and caprices of the people in power without any question of accountability for such funds. Until such mindset abates from government circles in Nigeria, hardly will further loans attract citizen endorsement.