The FG has the plan to borrow $29.9bn from the World Bank, ADB and Bank of Japan to finance the 2016 budget. This is a fall-out of the recession the nation finds itself caused by low oil price, vandalization of oil installations and the lack of saving by the previous government. Out of the money to be borrowed, $25.8billion is for projects in health, agriculture, water supply, education, growth and employment generation, while the sates would have $4.1billion of the fund for their development activities. I am more concerned about the money going to state governments because of the kind of people we have running the affairs of the states. Give them $4bn and you will see state governors buying planes instead of developing their states.
The FG part of the loan is for projects that will develop the nation like the Mambilla Hydro Electric Power Project ($4.8billion), Abuja Mass Rail Transit ( $1.6billion), completion of Railway modernization of coastal Project from Calabar to Port Harcourt-Onne Deep Sea Port segment ($3.5bn,Lagos-Kano Railway modernisation project and the Lagos-Ibadan; Kano-Kaduna ($2.4bn) . This loan is President’s Buhari’s answer to the nation’s economic recession which we advised as a way to reverse recession by huge spending to stimulate growth. Those saying the government should use recovered loot instead of external borrowing should remember the recovered money was mostly in Naira which will not address the major issue of depleted foreign reserve. The government also needs an act of National Assembly to legally spend the money. The nation does not have that luxury of time.
What’s the problem with borrowing?
There is hardly any economic reason to fear a long term loan at low interest rate. In relation to GDP, Nigeria is not even a debtor nation. A loan with a tenor of 20 years at 5-10% interest handled by a financially prudent and responsible government is a welcome idea and a fast way to get out of recession. Of course, there are economic issues like inflation, high interest rate ,high taxes crowing out and interest repayment to worry about, but the loan Nigeria is seeking will not lead to such problems. The truth is every nation needs a leverage of loan to fast track its development. There is no developed nation without a debt. The biggest economies are the most heavily indebted. The United Kingdom is in debt deficit of 11% of its GDP and has a 43bn pounds of interests to pay. In United States, if you share the national debt to each man, woman and child will owe about $42,998 according to Money and Time survey by Time magazine. What people don’t know is that national debt is not family finances. The difference is that government has the central bank to manipulate the economy. It has more financial flexibility to get out of trouble. Also government lives a long life unlike a family with average life span of 70 years. Today US National debt is $19trillion, more than 3/4 of its GDP yet paradoxically the largest economy the richest nation on earth.
Senate failure to approve the loan
The senate said it turned down the loan request because there was no details. The presidency said there was detail as mentioned in the forwarding note from the president. For some reasons, the letter was said to come without details on repayment and expenses. The Nigerian senate knew the loan was to shore up reserve and finance the budget. As the year 2016 closes, budgets are at near 0% except for recurrent. All projects detailed in the budget are non-implementable without money.
People are complaining of recession and at same time rejecting a loan. Compared to the GDP ratio, Nigeria even with the loan will not be a heavily indebted nation. As at June 2016 Nigeria had a loan of $61m. Compare that to a GDP of $568bn and you will discover we have not borrowed enough in relation to our size and development needs. I will not encourage a corrupt and wasteful government to borrow. But then, this government is neither corrupt nor wasteful. It can be accused of many things but it is not a government that will borrow to finance election and graft.
Those complaining of recession should know that the loan is supposed to reflate the economy and improve the exchange rate of the Naira. The President gave details of the loan but the senate said it didn’t see the attachment. We are used to it. Give police your vehicle particulars and he will tell you he can’t read it unless you provide money for reading glasses.
And the VP with litany of goofs
The Vice President, Yemi Osinbajo told the nation that “Hunger will soon vanish” in Nigeria. I remember how he promised to provide youth with 200,000 jobs and failed. This made me to ask a question -Is this VP not a man of God again? Why lying in the name of politics. The truth is a leader cannot deliver food by simply prophesying about abundance while cozying in his comfort home in the Villa. If service delivery it’s about religion and prophesies, Nigerians would have voted for religious leaders.