The $30 Billion Borrowing Gamble

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In a cynical, almost contemptuous manner, the Senate on Tuesday threw out President Muhammadu Buhari’s letter seeking approval for an external borrowing plan of $29.96 billion to execute key infrastructural projects within the next two years. But it was done only on technical grounds. And to the extent that this is just the end of the introductory chapter rather than the close of the book, I will admonish the National Assembly members to be circumspect in critically examining this particular request that could, in the long run, put the nation in another bind.

In 2005, Nigeria successfully negotiated a complicated debt write-off deal of about $18 billion after a cash payment of approximately $12 billion to free the nation from the Paris Club debts of over $30 billion, most of which were accumulated interests and charges. A huge chunk of the loans was secured in the 1980s to fund what turned out to be white elephant projects. And with about $3 billion dollars spent annually just on debt servicing as at the time the write-off was concluded, the argument to exit the Paris Club by the Olusegun Obasanjo presidency was indeed very sound.

As one of the people who supported the debt write-off deal just 11 years ago, that we are engrossed in another national debate on the appropriateness of treading the same path raises serious questions about whether we ever learn any lessons from our national experience. It is even more worrying that this idea to borrow is coming at a period our capacity to meet repayment obligations is dwindling, given the crisis in the Niger Delta.

Before going further, it is important to underscore the fact that in an economy in recession, there is need for some fiscal package to help stimulate consumption and production, create jobs and generally engender economic growth. But two critical questions beg for answers. One, assuming, without conceding, that there are compelling needs for some external borrowing, is it not important to first close all loopholes and drainpipes in the system; drastically restructure and rationalise government agencies and reduce the huge overhead cost that consumes a large chunk of annual budgets at all levels? Two, does the Buhari administration have on its side skilled officials who can negotiate the fine lines of the ‘conditionalities’ for the borrowing plan, as being proposed?

If we ignore all these and borrow, such funds may never be channeled into those projects highlighted by the administration and the nation would be left with nothing but huge debts to service, at very high costs. Yes, we have been told by IMF that it is possible to get interest free loans from the international debt market but we all know that there is no free lunch anywhere, not even in Freetown. So, it makes more sense to see the fine prints of these deals before our nation is committed, especially now that some of our lawmakers would also want a piece of the action for their “constituency projects”—another euphemism for sharing public money.

meeting with the leadership of the senate who visited her office last week, Finance Minister, Mrs Kemi Adeosun painted a pathetic picture of our national economy. “By the time we pay salaries, pay debt, nothing is left. So, for these next few years, I think we have to take a gamble as a nation. We must take a gamble that ‘look, if we fix our roads, fix our power, can we generate more than that additional cost?’ I think we can, from what I see of a country, I think we can”, she said.

However, while I have no problem with such ‘gambling’ in national economic management, I still believe the administration is not without options. For instance, the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu also said recently that the federal government was set to sign a cash-raising oil deal with India for $15 billion. “Nigeria has a bit of a cash flow problem right now. Our reserves are not as strong as we want them” said Kachikwu who argued that because the value of the national currency is on a freefall, “what we are trying to do is to leverage on the assets we have to receive immediate cash.”

This option is particularly plausible because, even if we borrow, our only way of paying back is with our oil assets. President Buhari himself admitted as much last week. “The petroleum industry remains critical to the Nigerian economy of today and the future, despite our current challenges. The golden era of high oil prices may not be here now, but oil and gas resources still remain the most immediate and practical keys out of our present economic crisis”, said the president at the public presentation of a roadmap on short and medium term priorities to grow Nigeria’s oil and gas industry from 2015 to 2019.

Unfortunately, the United States Energy Information Administration, (EIA) recently projected a negative downturn for the country’s crude oil production because of the militancy in the Niger Delta. In confirming the prediction, Kachikwu noted that between January and June 2016, over 1,600 incidents of vandalism were recorded. He explained that compared to the 2.2mbpd targeted in the 2016 budget, the country currently produces 1.56mbpd showing a shortfall of about 640,000 bpd, which translates to 29.1 per cent loss.

To underscore the gravity of the situation, the NNPC Group Managing Director, Dr Maikanti Baru, also said last Friday: “Over 7000kpd of crude oil has been lost due to vandalism this year. A bulk of the loss is from JV assets. This implies that 60 per cent of oil production lost is NNPC-FGN equity. At an estimated price of 45 dollars per barrel, the total 2016 revenue loss to the Federation Account translates to about 7 billion dollars. This loss is equivalent to a new 7,000mw power plant; new 350kpd refinery; over 30 per cent of National budget; and a new 1,700 kilometre pipeline.”

Therefore, it is difficult to fault the president that the only way forward is to grow the oil economy. But for that to happen, he has to resolve the Niger Delta problem which remains a low-hanging fruit his administration has been unwilling, until now, to pluck. Yet, as it has become very evident, force cannot resolve the issue. It would take deft political management, as was demonstrated by the late President Umaru Musa Yar’Adua. It may be coming late in the day but it is good that the president has finally realised that constructive engagement still remains the most practical and cost-effective method of dealing with the Niger Delta problem. But then there are immediate challenges and that brings us back to the issue of the proposed loans.

I have been told by those who should know that embedded in the N6.08 trillion 2016 budget is a deficit financing of N2.2trillion out of which N900billion was to come from the international debt market while N984billion would be raised from the domestic market, totaling N1.84trillion. Strictly speaking, therefore, the approval the President is seeking for about $30billion may actually be academic, though transparency requires that the terms of the borrowing be spelt out so that Nigerians can understand the full implications of what the administration is doing.

That is where the problem begins. It beggars belief that an administration that plans to borrow and spend $30 billion within a period of two years is now just going to put some documents together. “One of the technical things missing is that, the letter (from President Buhari) says. ‘attached is a draft’ but there was no attachment…there was no detail of the borrowing plan,” said Senate Leader, Ali Ndume.

Yet, if there was any notion that the lack of attaching the draft could be an oversight, it was immediately dispelled by the Presidential Liaison Officer to the National Assembly, Senator Ita Enang. “There are certain information and details which will enable them to consider in detail, and appropriately the request of Mr. President. So we are collating that information. The Budget Office of the Federation, the Debt Management Office, the Minister of Budget and National Planning, Minister of Finance and the economic team are collating the information so that it can be submitted to the Senate to enable them take the appropriate decision.”

The implication of that statement is that it is just now that the information on loans deals worth a whopping $29.96 billion expected to be spent within the next two years would be collated! Yet, the Debt Management Office (DMO) Director General, Dr. Abraham Nwankwo is all over the place, defending what he probably has little or no idea about. Besides, how can the DMO approbate and reprobate at the same time?

According to the 2016 Report of the annual Debt Sustainability Analysis (DSA) of the same DMO published last week on its website, “the debt portfolio (of Nigeria) still remains highly vulnerable to persistent shocks in revenue, indicating a potential challenge in maintaining debt sustainability”. The report puts Nigeria’s outstanding debt portfolio as at December, 2015 at about US$65.43 billion compared to US$67.73 in 2014, thus representing an increase of 12 percent. And these did not include the figures for the 36 states that were not ready as at the time of compiling the report.

From my reading of the situation, this money, if secured, may buy the nation two to three years of some feel-good situation but then, what follows will be the problem of how to pay back. This becomes even more challenging against the background that most of the projects listed for funding under the proposal are neither regenerative nor capable of bringing enough returns on the investments. Indeed, to the extent that the entire loan package is more than the total external reserve of Nigeria, it looks as if the federal government is just desperate to buy itself some reprieve from an increasingly hungry (and angry) populace. Yet, the reality remains that a government that will enter a lame duck stage in another year or so has no business contracting a debt of such magnitude.

But then, as one respected banker is wont to surmise on such perplexing issues, what do I know?

Politics in the Age of Trump

I arrived here in Cambridge, Massachusetts on Tuesday for the second “Fellows Alumni Reunion Conference” of the Harvard University Weatherhead Centre for International Affairs with the theme, “Confronting New Realities in an Uncertain World”. With experts drawn from within Harvard and around the world, we will spend the next three days engaging such issues as Europe After Brexit; The Middle East in the Aftermath of the Arab Spring; Is Globalization at Risk?; Africa in 2016: Challenges and Opportunities; China in the World; Religion and Politics; Latin America at a Crossroads; Trade in the Current Election; Human Rights and International Politics; Putin’s Russia; The ‘War on Terror’: Responding to ISIS and Other Global Threats as well as Broadening Social Inclusion and Resilience in Successful Societies. However, as interesting as those issues are, I am almost certain that the dominant topic would be the United States presidential election coming up next Tuesday.

It is interesting that when the first reunion conference was held in April 2013, it was dominated by discussions over the terror attack at the Boston Marathon which prompted a lockdown of several towns within Massachusetts on the second day of the event, as we were all marooned at our hotels and places of abode. With our session this year coming less than a week to the American presidential election, the dominant issue will most likely be Mr. Donald Trump and what he brings to both the American and international politics.

Whatever happens on Tuesday night, as far as this election cycle is concerned, the Republican contender is already the star of the show and the impact of what he has done in this year-long campaigns will reverberate across the world for many years to come. Trump has practically legitimised so many things that were hitherto considered anathema for those seeking political office. He has advertised nothing but vulgarity about women and his wealth. He has promoted hate speech, bigotry and name calling, not only of his opponents but even of the physically challenged. He has offered empty platitudes in place of programmes. And he has publicly boasted that he could even commit murder in broad daylight and such egregious act would not affect his rating at the polls. The sad reality is that, in a way, it is true!

Following his victory at the Republican Nomination earlier in the year, Jonathan Freeland wrote a brilliant piece for ‘The Guardian’ of UK titled, “Welcome to the age of Trump” where he argued, and I agree completely with him, that whether he wins or loses, the rise of Trump reveals a growing attraction to political demagogues across the world and points to a wider crisis of democracy. “…this fury is not confined to the US. There are versions of it surging across the world, hot with wrath at the status quo. In almost every case, those voicing it claim to be speaking for the people and for true democracy. But in their most extreme forms they threaten to shade into something darker: a revolt against the norms, the agreed boundaries that make democracy possible”, wrote Freeland.

Even if Mrs Hillary Clinton—another unpopular contender whose main support base is being driven more by opposition to Trump than enthusiasm for her—eventually wins, the damage done to the image of America in this election cycle will take many years to repair. Now, the world knows elections can be “rigged” in the United States not only by the media and vested external interests but also by such institutions as the Federal Bureau of Investigation (FBI). The greater damage is that Trump has given ammunitions to autocrats across the world whose creed has always been that in seeking and retaining power, only the end should justify the means. It should also worry us in Nigeria.

On one of those online political forums that I belong, a respected former senator wrote last weekend: “With what the American EFCC (aka FBI) has done to Mrs Clinton, it is now clear that politics is the same everywhere and we are not doing anything wrong in Nigeria.” If we want to stretch that further, the argument would be that “with what Trump is doing in America, it is clear that politicians are the same all over the world so Nigeria is no exception to excesses.” In aspiring for leadership, Trump is now the new normal!

For sure, a serious interrogation of the leaders on our continent will reveal that many of them have sought and retained power using the Trump template. It requires no rigour since in any political arrangement, there are always constituencies that feel alienated by “others” which they usually blame for their woes. The difference between “Them” and that “Others” could be in the colour of skin, the religion they practice, cultural affiliations or social status. Politicians like Trump, who populate Africa, have no qualms verbalizing the anger, hate and resentment of those groups to advance their own careers while dividing the people along dangerous fault-lines.

In rallying such base, people like Trump know the buzz words. He will send the immigrants away. He will take America from “Third World” back to First World. When he becomes president, shop workers will go back to saying “Merry Christmas” rather than “Happy Holidays”. Here, I must state that as a Christian, I also feel irritated when I hear Happy Holiday rather than Merry Christmas but does that now make Trump the champion of the faith in our Lord Jesus Christ? Does he even understand the essence of that faith?

I am not to judge but if his comportments are anything to go by, Trump cannot be a Christian—at least not by his works. Or for that matter, his words!
In his new book, “What is Populism?”, Jan-Werner Müller, a professor of politics at Princeton University and a Fellow at the Institute of Human Sciences in Vienna, interrogated the rise of Trump and others like him who use “We versus Them” rhetoric to mobilize support. And it is worrying that such extremists are moving from the fringes to becoming the dominant force in many countries.

Earlier in the year, the far-right Alternative für Deutschland posted a shocking result at the German regional election. In France, the Front National has in recent years been steadily gaining grounds. In Austria, the far-right Freedom Party (FPO) is on the ascendancy, securing 18 seats, second only to the ruling regional conservatives at the last election. Last year also, the far-right Danish People’s Party (DF) finished second at the general election after winning 37 seats in the country’s 179-seat parliament. In the course of the campaigns, its leader, Pia Kjærsgaard said most remarkably that she did “not want Denmark as a multiethnic, multicultural society”.

Following the Brexit vote in May, I had written about how the British referendum could embolden right wing politicians who are spreading hate and intolerance around the world. “Indeed, the result may echo significantly in the United States where Mr. Donald Trump, the erratic Republican candidate for the November presidential election, was one of the first to congratulate Britain for ‘taking back their country’, in apparent reference to the anti-immigration sentiment that fuelled the Leave campaign and is driving his own aspiration for the Oval Office,” I wrote then.

Now, the world has only six days to find out. But perhaps because so much seems to be at stake in the election, not only has the American media taken sides, political partisanship has been taken to an unprecedented level. It’s almost like the Trump virus has infected several newsrooms in the country. Yesterday, the New York ‘Daily News’, for a second time in 12 days, splashed across its front page this bold caption: “Damn Right, We’re With Her! News double down on endorsement of Clinton for president—it’s that important”.

In the four-page editorial that follows inside, the newspaper repeated its earlier words that Trump is a “liar, thief, bully, hypocrite, sexual victimizer, and unhinged, self-adoring demagogue.” All those big words to describe just one man! Yet, notwithstanding such resentment that Trump has attracted to himself from the American establishment, he still commands a huge following that could be a disruptive force after the election even if he, as it looks increasingly likely, loses on Tuesday.

All said, the real challenge with the new populist movements spreading across the world is that their leaders simply prey on the weaknesses of the establishment to rise to power only to showcase their essential emptiness. But it is very troubling that we are witnessing the ascendancy of divisive demagoguery of the sort that can plunge the world into an unintended global conflagration. It is likely to begin with divided national societies, torn apart by the negative forces of racism, xenophobia, bigotry and intolerance.

That then explains why the thought of a Donald Trump at the apex of global power with access to the most awesome arsenal that humanity has assembled dramatises this fear even further. Therefore, even as a non-American, it is my hope and prayer that Trump loses come Tuesday.

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