by Owolabi Afeez Ashola
Recently, the Federal Government sent a letter to the National Assembly for matters classified as urgent with billions of dollars involved to be borrowed through international sources, which will add to the increasing debt of over a trillion Naira already owes. The external borrowing will spread through 2016 to 2018 (rolling), with the sum of $29.960 billions which is about N 9.61 trillion base on current exchange rate.
Are we not borrowing our future? This will depend on how judiciously and prudently the money will be spent. The entire projects earmarked for the North are as follows:
- Polio eradication support and routine immunization project – $125 million
- Community and social development projects- $175 million
- Nigeria states health programme investment project – $125 million
- State education programme investment project – $100 million
- Nigeria youth employment and social support project – $100 million
- Fadama lll project -$50 million
This, amid the controversial 2016 budget which is merely 15% implemented on capital expenditures. One can say the proposed projects are vital one if the Presidency breaks it down in details and enlightens Nigerians on the impact of these projects on the life of the citizenry. Why the doubts on this kind of borrowing? Past governments borrowed a lot which was mismanaged and ended up in the pocket of a few. Are we going back to the era of Paris club? Only time will tell.
Firstly, was an increase in loans from the International Development Association(IDA), a part of the World Bank that helps the world’s poorest countries. From a balance of about USD 1.4 billion in December 2006, the loan had more than tripled to USD 6.0 billion by June 2015. That was how fast the debt increased due to interest rate exchange rate and other factors.
A financial analytics company, Nairametrics, had noted that “back in 2005 Nigeria did something unprecedented in its history. It reached a deal with a band of external creditors to wipe out over USD 18 billion of what was crushing the economy. That was former Minister of Finance Ngozi Okonjo-Iweala’s signature deal in her first stint as Finance Minister.”
From a total debt balance of about USD 33 billion in 2005 Nigeria’s foreign debt was crashed to about USD 3.5 billion in 2006. In October 2005, Nigeria, and the Paris Club announced a final agreement for debt relief worth USD 18 billion, and with additional buy backs with other debtors an overall reduction of Nigeria’s debt stock by USD30 billion was effected. The deal was completed on April 21, 2006, when Nigeria made its final payment and its books were cleared.
President Buhari has good intentions for this nation but he has a lot to do if these projects will see the light of the day. The National Assembly too is not left out, they have a role to play. For this type of huge borrowing there must be in place a blueprint on how to generate funds for repayment. Gone are the days of $100/barrel of crude oil. Recently World Bank rated Nigeria in the World Bank’s Ease of Doing Business. According to the World Bank report, the improvements noted mean that last year, Nigeria’s business regulatory environment as captured by the doing business indicators improved slightly in absolute terms.
The Federal Government can raise funds through bold and tackle these projects bit by bit. It will be from fry pan to fire if at the end these funds end up in the hand of State Governors to manage some of these projects as the funds might be diverted to other means as experienced in the bail-out funds meant to sort workers salary. Some of these state Governors only wait for revenue allocation to be shared to meet up with their operations which end up being used to pay just salaries and finance their imprudent spending.
It’s high time the state governments found means of generating revenue other than relying on the Federal Government. Some states have what it takes to generate revenue like tourism but will not. They no longer spend on capital expenditures but recurrent. While the above break down for the purpose of the fund is important, the government should also focus on Small and medium entities; this is the sector (private sector) that creates jobs, as the government cannot provide the number of jobs needed to meet with the rate of unemployment in the country.
Op–ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija
Owolabi Afeez Ashola writes from Lagos state. He tweets @Asholaafex