LAST week ended with bad news for President Muhammadu Buhari. For a President who promised so much but has so far delivered too little, the news from the Senate seems to have offered more basis for worry than relief or any positive ‘change’. Inflation has reached a run-away high of 18.3 percent, according to figures from the National Bureau of Statistics(NBS).
But that is just one item in the basket of worries snapping at the feet of Mr.President. The big worry is the insistence of the Senate that its earlier decision not to approve the President’s $29.9bn external loan request remains what it says : No deal. That was the message delivered last week by the Senate President Bukola Saraki. He said the position of the National Assembly on the matter has not changed. He spoke against the backdrop of his recent meetings with President Buhari in the Presidential Villa. Three weeks ago, the Senate had rejected the President’s request for the loan. It was thrown out through a voice vote.
There was no debate on the merits or otherwise of the loan. Saraki said pointedly that the meetings he had with the President has nothing to do with the loan. That means that the Federal Government’s Medium-Term (Rolling External Borrowing Plan(2016-2018) will be hanging in the balance ,at least for now. It was thrown out through a voice. Saraki’s statement through his media aide was the latest chapter in what is turning into a frustrating effort to get the loan approved and use it to rev up the troubled economy. Two questions : why should the Senate reject the loan in spite of the reasons given by the presidency? Are the reasons given by the Senate, and indeed, the National Assembly, for refusing the president’s request cogent enough?Neither of these scenarios requires any leaps of imagination.
I honestly do not believe that the decision of the Senate was based on national interest, neither did the Upper Chamber act ,as it claims, “in the interest of our people”. I am inclined to believe the opposite. The hard-line position by the Senate in this matter is to settle scores with the President. Don’t forget that the relationship between the two arms . It is important that the Senate approves the loan. First,it is necessary and urgent to save the President from himself. The economy is bleeding on all sides. The citizens are groaning. Therefore, it is expedient now to save the country from sinking deeper into recession. But it appears the Senate has made up its mind: No deal ,regardless of the merits of the loan . That’s unkind and unfortunate.
Highlights of the loan show that $11.274bn will be invested in special national projects,$10.68bn for Euro bonds of $4.5bn and Federal Government budget support of $3.5bn. Other projects listed in the borrowing plan include: $75m for community and social development project, $125m for States health programme Investment project, $100m for Nigeria Youth Employment and Social Support Project and $50m for FADAMA 111 project . Government says interventions and projects contained in the borrowing plan were selected based on positive technical and economic evaluation, as well as the contributions to the socio-economic development of the country. These include employment generation and poverty reduction and protection of the “most vulnerable and poor” in the society.
Let’s even concede that the President and his economic advisers did not do their homework before submitting the Borrowing Plan to the National Assembly. Let’s also agree that in a matter of such national importance, the presidency ought to have consulted sufficiently with the lawmakers. It is called lobby. It is a standard procedure in any democracy. But that should not override the purpose of loan. Nigeria needs this loan to get the country out of ‘jail’.
There’s no doubt $29.9bn is a hefty amount . And the Senate is right to have asked for details. But outright rejection is in bad faith.I want to believe that in the end, the National Assembly will approve the loan. Maybe the lawmakers want a quid pro quo. Constituency allowance could be part of the deal. Let the President go back to the legislature with a clear framework that does not marginalise any segment of the country. Already, the South East is fuming over the exclusion of the zone in projects’ listing in the Rolling Plan. Besides, government should be cautious in its borrowing plan, both in the domestic market and from multilateral institutions .
One can understand the concerns of those who oppose the loan. The Federal Government has borrowed quite a lot in recent months. The latest being the $600m from the African Development Bank (AfDB) at 1.2 percent concessionary interest rate. Experts have repeatedly cautioned on the negative consequences of such excessive borrowings on the economy as did our previous debt the Paris Club of creditors. The good news is the assurance by the Debt Management Office (DMO) that the loan is within the acceptable threshold of $22bn for the next three years. One of the major concerns is that the loan could raise Nigeria’s total external debt to $41bn in three years and perhaps increase the nation’s Gross Domestic Product (GDP) ratio from 13.2 percent to 20.7 percent. If approved, it could take Nigeria’s total outstanding debt to an all-time high of $102 bn by end of 2019. As of June 2016, Nigeria’s public debt stood at N16.29 trn, up from N12.60 trn that it was at the end of last year. The current outstanding debt stands at $61.4bn.
Though on the surface, Nigeria seems not in danger regarding its debt to GDP ratio and therefore can absorb extra borrowing. However , there are genuine concerns that if the loan is approved, it may spike national debt service to an unsustainable level, especially if the Federal Government continues to spend at the present level which is 70 percent of revenue for recurrent expenditure. Records show that the Federal Government spends an average of N35 of every N100 to service debts.
Our lawmakers should take a bipartisan approach in the debate on the loan request when it is re-presented. They should scrutinise the pros and cons . One is aware that the External Borrowing plan is one of the strategies put in place by government to avoid high interest rates locally. Recently, the Finance Minister Mrs. Kemi Adeosun reportedly told bond investors in London that Nigeria was in the process of securing $3 bn in development loans with plans to target low-cost and long-term loans with interest rates of 1.25 percent and maturities of 20 years.
However, government must not lose sight of the fact that Nigeria’s borrowing costs have already reached a record high this year. For instance, short-term Treasury bills with 6-month tenors have netted about 22 percent in August. The immediate consequence is that this has rendered the private sector less competitive in its ability to secure loans as a result of high interest rates on government fixed income securities. The key advice remains: government should borrow cautiously and spend prudently.