What will stop Buhari from borrowing?
Nigeria under President Muhammadu Buhari is currently on a borrowing spree. Something drastic appears necessary to arrest this undesirable trend. Who will save us from this menace? Since the current administration came into power in May 2015, its mantra, apart from its characteristic blame game of past administrations, seems to be that of “borrow, borrow and borrow” until there is no more money to borrow anywhere. The recurring news of government borrowing so much today, so much the next day and so on has left many Nigerians worried as to whether the government is actually on a rescue mission or has other unwritten agenda. This appears so when the interest of the next generation is not being considered. People have wondered whether the authorities in Abuja are concerned about the repayment of these loans.
Indeed, the current state of a growing public debt profile in the country is scary. Official data indicate that total debt grew from N12.118 trillion in May 2015, to N12.6 trillion in December 2015, N17.36 trillion in 2016, N21.725 trillion in 2017, N24.387 trillion in 2018 and N27.401 trillion in 2019. The figures skyrocketed to frightening levels in 2020 with the active connivance of the Ninth National Assembly under the joint session chairmanship of Senator Ahmed Lawan. In the early years of the Buhari administration, figures from the Debt Management Office indicate that Nigeria’s total debt increased by about 90% between December 2015 and March 2018, from about N12.6 trillion to about N22.71 trillion and that total domestic and external debt stock of the federal and 36 state governments and the Federal Capital Territory, stood at N22.38 trillion or $73.21 billion in June 30, 2018. It can be recalled that this National Assembly approved a whooping N10.08 trillion or $28 billion loan for the Buhari Administration within a period of one year. With the latest public borrowings of N8.7 trillion and N5.51 trillion accompanying the approvals of the 2020 federal budget, the overall public position has risen to about N41.6 trillion. This is from N12.118 trillion in May 2015 when the Buhari administration took office. This implies that this administration has more than tripled the total public debt in five years. These recent loans have come from various sources, $3.4 billion loan from the International Monetary Fund, $2.5 billion loan from the World Bank, $1 billion loan from the African Development Bank, N850 billion domestic capital market loans and a host of others. In line with this borrowing spree, the Federal Government had earlier in the year concluded plan to borrow N2 trillion from the current N10 trillion pension funds to finance the development of infrastructure, following a decision taken at a recent meeting of the National Economic Council (NEC) under the chairmanship of the Vice President, Yemi Osinbajo. An articulation of the recent borrowing plans of this administration sheds more light on the downward trend the economy is taking with these questionable moves.
With the above situation, so many questions are begging for answers. There are indeed more questions than answers. It is disturbing that the government has been stubbornly going ahead in the procuring of these liabilities despite reservations expressed by different stakeholders in respect of the equitable spread of the projects, possibilities of seamless repayment plan and viability of some of the projects for which the loans are being sought. The usual response by the authorities is that following from the debt-to-gross domestic product (GDP) ratio criteria, the country is currently under borrowed. It however fails to inform the public that the debt service-to-revenue ratio is terribly unfavourable. The current debt service-to-revenue ratio is over 50%. Currently, with the latest borrowings, as indicated in the revised 2020 Federal Government budget, the debt service payment increased to about N3 trillion in 2020 alone for a projected revenue inflow of about N6 trillion. What would be the country’s future credit worthiness with this huge debt particularly when the international oil market, which guarantees the country’s major foreign exchange earnings, is volatile and highly unpredictable? Aside from these, are issues of repayment being seriously considered when these loans are being approved, particularly when it is obvious that any incoming administration in 2023 will be inheriting a heavy debt burden and thus will find it difficult to operate? In the event of a future sovereign default, what remedies are in place to address the problem or what national assets would have to be sold to service the debts? The sorry public debt situation in a number of African countries, such as Zambia and Kenya, among others that have run into serious crises in this regard are quite instructive.
The role of the National Assembly in this matter has actually compounded the problem. The current federal legislature, which has been tagged by many as a “rubber stamp” of the executive has been playing true to this description. It appears that it evaluates these loan proposals using other considerations apart from economic viability and national equity. It also appears that it hardly carries out thorough or critical analyses of the loan proposals before approvals are granted. This has been the case since this Ninth Assembly was inaugurated in June 2019. It has actually surpassed the Eighth National Assembly and those before it in easily passing borrowing plans without adequate scrutiny as well as the feasibility of a seamless repayment plan. This National Assembly doesn’t appear competent to question any borrowing or other agenda of Buhari at all. Where then are the expected benefits derivable from the checks and balances of the presidential system of government, which is designed to strengthen governance in the pursuit of the common good. Ironically, the Senate President, Ahmed Lawan has consistently insisted that the nation faces no debt problem. This is worrisome.
Many stakeholders wonder why the current unprecedented upsurge is taking place in public borrowings, particularly when most of the projects being financed with these loans are domiciled in certain parts of the country whereas when the time of repayment comes, every part of the country will be involved.
This is not equitable. Is all this about “making hay while the sun shines” before power changes hand in 2023? Or is the fear of an inevitable restructuring of the country a factor in this regard? The government is better advised that the debt to GDP ratio does not guarantee the debt repayment. It is surprising that the government is not even cutting the cost of government in the spirit of the trying times. Instead it has resorted to more and more borrowings as the way out of its challenges. The Buhari government is touching off a time bomb for future administrations and thus making the country difficult to govern in future. Maybe the government is hoping for a debt cancellation, as president Buhari recently canvassed for African countries. Is that the kind of change the Buhari administration has brought to Nigeria? Is this part of the promised next level? Whoever is advising this government to take this unsustainable path should have a rethink. Nigeria needs stability not the building of a pack of cards that would easily crumble at the slightest turbulence. These borrowings should stop, at least in the interim. The county can do better without them. Nigeria is in a terrible race to the bottom with the current unbridled thirst for borrowing.