Other people’s money

The Nigerian Labour Congress, NLC, has expressed its disagreement with the federal government decision to accept a World Bank loan of $3 billion towards the expansion of the power and distribution networks. Its president, Ayuba Wabba, advised the government instead to “focus on the recovery of more than $100 billion the international oil companies owe Nigeria.”

Wabba actually echoed Femi Falana, SAN, who did not think it was wise for the government to seek the additional loan when it could get more money from “the payment of funds accruable to Nigeria from periodic adjustments in remittances by the international oil companies.”

I suppose government has invited us to accept this is part of its efforts to run the generator merchants and their protectors in government out of business. We would be foolish to accept the invitation. We all know that it would take more, much more, than this new World Bank loan for Nigeria to generate and distribute anything more than the current fitful 3,000 megawatts of electricity. The interests are too entrenched in the system to make that anything but possible.

In the times before these, the $3 billion loan would have qualified, all things being equal in an oil rich nation, as something the chickens could spend on their feeding. They eat caviar too, you know. We should worry that the country is steadily accumulating foreign debts once more. The Debt Management Office has never spoken from both sides of the mouth about this. The latest facts about the federal and state government debts released by DMO are these:

1. As at the end of June this year, the total public debts leaped from N3.32 trillion to an astronomical N25.7 trillion.
2. The share of the federal government debt as at then was N20.42 trillion while the 36 states and the Federal Capital Territory owed N5.28 trillion.
3. There has been a steady short fall in the country’s revenue projections since 2017. That year, the federal government expected to earn N5.08 trillion but only a paltry N2.7 trillion made it into the national treasury. 2018 was not that kind to the government either. It projected a revenue of N7.16 trillion but earned only about half of that – N3.96 trillion. This year the government lowered its sight slightly in its revenue projections. It projected N6.98 trillion. As of June, it earned about N2.04 trillion. Perhaps, 2019 would be kinder to the government and its projection could transmute from hope to reality. We would know when the year rounds off the corner and yields place to the magic year – the year of Vision 20/20 when we can see our way clearly as the next level lifts up our country.

On the face of it, it does not take rocket science to see why the government has had to borrow to make up the shortfall in its revenue projections to enable it to deliver the dividends of democracy to the people. In December 2016 President Buhari asked the senate to permit him to borrow $30 billion from the World Bank to help him put our ailing infrastructures – the bane of our industrial, economic and social development – in order. I cannot confirm if the senate permitted him to take the loan but if he took the loan, it would seem from the sclerotic health of our infrastructures that the money probably made the kind of impression a teaspoon of water would make if you poured it into the Atlantic Ocean.

The senate too has cautioned the government against borrowing more. At a public hearing on the 2020 budget October 24, the senate president, Ahmad Lawan, advised the government to wean itself from “continued reliance on borrowing to fund the infrastructure needs of the country.”

A strong case can be made against government loans. The most plausible case against it is that they transmute into a debt burden on future generations. The borrower government is not usually the government that repays the loan. The huge irony is that the world economy moves on the axis of other people’s money.

The problem, therefore, is not borrowing per se because no government has enough money to meet all its financial commitments. All of them borrow. And loans leave their dirty marks on borrowers. The problem is that borrowing dangles the temptation of an easy option for governments. After all, loans are other people’s money. Other people’s money is sweet; so, the borrower is often quite deaf to the jangling noise of the strings attached to it. Other people’s money saves governments the headache of having to think of alternative sources of keeping the treasury in a good financial shape. Borrowing is a chop-now-pay-later option. It provides only a temporary financial relief and postpones the evil day when the lender comes knocking at the door.

We heard that knock for many years before the Obasanjo administration succeeded in persuading the Paris Club to forgive a large chunk of our debts owed to its members for many years. It was a great relief to the country and the managers of the national economy. Nigeria cannot afford to go that way again. Let us pull back now from piling up the debts and avert serious social and financial crises in the near future.

I believe it is right and proper for the federal government to commit to a comprehensive revamping of our infrastructure. But here is something that I find confusing. In the president’s 2020 budget proposal, as pointed out earlier, the capital vote is a piddling N2.14 trillion. But the government committed N2.5 trillion of the budget to repaying part of our debts. It is called debt servicing in technical terms. A quick calculation tells you that it is one-quarter of the entire budget. See why it would be unwise to plunge the country into another loan jamboree?

When the minister of finance, budget and national planning, Mrs Zainab Ahmed, appeared at the public hearing on 2020 budget October 24, she told the members of the national assembly that Nigeria has a “revenue crisis and not debt crises.” She did not think Nigeria had over borrowed because “the total borrowing rate of the country was under 50 per cent of the GDP.” She was trying to allay our mounting fears that the debt burden is already crushing the country. Not yet, apparently. And if our borrowing rate is under 50 per cent of GDP, there is still room for more borrowing, as in the $3 billion loan approved for the country recently, right? She seems to think so.

The minister admitted at the IMF/World Bank meeting in the US recently that the country was finding it difficult to service its debts. That is no brainer, really. It can’t service its debts because not enough money is flowing into the national treasury. I would think this must be the worst time to borrow more money, even for infrastructure. How does a country service its loans if it is faced with an existential threat like a revenue crisis?

It is a catch-22 situation. If the government does not have money and is not allowed to borrow, how would it prosecute its 2020 budget? My head aches. As it is, our country stands the risk of being driven into the arms of the international do-gooders, the IMF and the World Bank, with their strangulating conditionalities. Let’s say, not again. I assure the managers of our national economy of my sincere sympathies.